The Commonwealth of Massachusetts: One Ashburton Place, Room 1819 Boston, Massachusetts 02108

The Commonwealth of Massachusetts
AUDITOR OF THE COMMONWEALTH

ONE ASHBURTON PLACE, ROOM 1819
BOSTON, MASSACHUSETTS 02108
A. JOSEPH DeNUCCI TEL. (617) 727-6200

AUDITOR
NO. 2008-1374-3S1
INDEPENDENT STATE AUDITOR’S REPORT ON

CERTAIN ACTIVITIES OF THE OFFICE OF
MEDICAID AS ADMINISTERED BY MASSHEALTH
IN THE MANAGEMENT OF ADVANCED
IMAGING PROCEDURES
OFFICIAL AUDIT
REPORT
SEPTEMBER 1, 2010
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Last saved by Nick M. D'Alleva on 8/31/2010 12:09 PM Modified by Template Group on 6/9/2004
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2008-1374-3S1 TABLE OF CONTENTS/EXECUTIVE SUMMARY
TABLE OF CONTENTS/EXECUTIVE SUMMARY
INTRODUCTION 1
MassHealth, within the Executive Office of Health and Human Services (EOHHS),
administers the Medicaid program, which provides comprehensive health insurance or help
in paying for private health insurance to approximately 1.2 million Massachusetts children,
families, seniors, and people with disabilities. In fiscal year 2009, MassHealth paid
approximately $6.7 billion on approximately 65 million claims to 30,000 providers, of which
50% 1 was federally funded. The Medicaid program represents approximately 30% of the
Commonwealth’s annual budget. In fiscal year 2009, MassHealth paid in excess of $94
million on approximately 2.5 million claims to 660 providers for radiology services. Within
radiology, there are three particular imaging modalities we have collectively termed
“advanced imaging:” computed tomography (CT), magnetic resonance imaging (MRI), and
positron emission tomography (PET). In fiscal year 2009, MassHealth paid in excess of $30
million on approximately 582,000 claims for advanced imaging services. Advanced imaging
services accounted for 22.7% of the quantity and 32.7% of the total radiology claims paid.
For the period fiscal year 2004 to fiscal year 2009, the amount paid for advanced imaging
claims increased 35% and the quantity of advanced imaging claims paid increased 75.4%.
Claims for all services covered by MassHealth increased at a much lesser rate; the amount
paid increased by 10.8% and the quantity of claims paid increased 38.9%.
The volume of advanced imaging services provided to consumers has increased dramatically
over the past decade. Many experts attribute this growth to the increased utilization of
advanced imaging in expanded procedures for both diagnostic and medical treatments. In
response to rapid and sustained growth in the volume of advanced imaging services, there is
concern by federal and state governments about potential over-utilization, and they are
responding with regulatory initiatives. Of particular concern is physician self-referral of a
patient to a specialized medical facility performing advanced imaging services in which the
referring physician has a financial interest. To discourage and regulate physician self-referral,
the federal government enacted the Ethics in Patients Referrals Act, also known as the Stark
Law, 2 in 1989. However, this law does contain a number of exceptions which makes the law
less effective, unless states adopt provisions to limit or eliminate these exceptions. There is
also a federal anti-kickback statute 3 that makes it illegal for physicians to accept bribes or
other compensation in return for generating Medicare, Medicaid, or other federal healthcare
program business. A physician also cannot offer anything of value to induce federal
healthcare program business. The statute includes numerous permitted “safe harbors,” such
as investments in group practices. 4
Many states regulate self-referral to prohibit or at least disclose self-referrals to patients.
Massachusetts requires disclosure for physical therapy service referrals, if the referring
1 The American Recovery and Reinvestment Act (ARRA) provided a temporary increase in the federal matching
percentage (FMAP) for Medicaid from October 1, 2008 through December 31, 2010. The FMAP was increased to
58.8% for Massachusetts.
2 Section 1877 of the Social Security Act
3 The Medicare and Medicaid Patient Protection Act of 1987, Section 1128B(b) of the Social Security Act [42 U.S.C.
1320a-7b(b)]
4 “Report of the Special Commission on Ambulatory Surgical Centers & Medical Diagnostic Services,” July 1, 2007, pg.
33
i
physician has a financial interest. However, there is not a similar requirement for radiology
services. In 2006, Massachusetts established the 16-member Special Commission on
Ambulatory Surgical Centers and Medical Diagnostic Services 5 to investigate and study the
impact of medical diagnostic services, specifically MRI, on health insurance, Medicaid, and
uncompensated care costs. On July 1, 2007, the Commission submitted its report, 6 along
with recommendations laying out principles and direction for future legislation and possible
regulatory changes. The report indicated that, unlike other states, Massachusetts does not
have certain prohibitions against self-referrals, which could potentially result in significant
negative consequences. Among the future legislation and possible regulatory changes, the
Committee recommended that the Legislature act to address potential self-referral issues
with respect to state payers by piggybacking the provisions of both the Stark Law and the
anti-kickback statute, including all exceptions and safe harbors, in state law.
In further response to the growth in utilization for advanced imaging services paid by
Medicare, the federal government reduced reimbursement rates for advanced imaging
services in 2006 and 2007. In excess of $1.5 billion was saved by Medicare in 2007, more
than three times the level anticipated by Congress. 7 As a result of the rate reduction, the
growth in Medicare-covered advanced imaging services has slowed. More restrictive
requirements for advanced imaging are proposed in the 2010 federal budget.
Adjustments to Medicare reimbursement rates can have a direct and immediate impact on
MassHealth’s costs if MassHealth does not match the rate reductions in a timely manner.
An individual who is covered by both Medicare and Medicaid is known as a dual eligible
beneficiary. If a dual eligible beneficiary 8 has a service that is covered by Medicare;
MassHealth pays the lesser of the difference between the MassHealth rate less the Medicare
payment, or the co-insurance and deductible amount. 9 The differential amount is termed a
Medicare crossover claim and payment. Nationally, the more than eight million adults who
are dually eligible represent approximately 18% of the Medicaid population, but account for
46% of the program’s costs, due to their complex array of medical, behavioral, and long-
term care needs. In Massachusetts, there were approximately 230,000 MassHealth members
with dual eligibility in fiscal year 2009, or approximately 20% of the Medicaid population.
MassHealth makes payments for all in-state non-institutional providers in accordance with
the methodology established by the Division of Health Care Finance and Policy (DHCFP) in
EOHHS, 10 subject to federal payment limitations. 11 The DHCFP adjusted MassHealth’s
reimbursement rates for advanced imaging services four times beginning in July 2006. Twice
the rates were increased, and twice they were reduced.
In accordance with Chapter 11, Section 12, of the Massachusetts General Laws, the Office
of the State Auditor conducted an audit on advanced imaging within the MassHealth
radiology program. Our audit was conducted in accordance with applicable generally
5 Established by Section 105 of Chapter 139 of the Acts of 2006

6 “Report of the Special Commission on Ambulatory Surgical Centers and Medical Diagnostic Services,” July 1, 2007
7 Ilyse Schuman, “Saving Lives and Money,” Imaging Economics, April 2009
8 A dual eligible beneficiary is an individual who is covered by both Medicare and Medicaid.
9 130 CMR 450.318 (C) The Division’s crossover liability will not exceed: (1) the coinsurance and deductible amounts as
reported on the explanation of benefits or remittance advice from Medicare; (2) the Division’s maximum allowed
amount for the service; (3) the Medicare approved amount; or (4) the Division’s established rate for crossover payment.
10 130 Code of Massachusetts Regulations 450.232: Rates of Payment to In-State Providers
11 42 Code of Federal Regulations 447.304
ii
accepted government auditing standards. The objectives of the audit were to determine: (1)
whether industry and regulatory developments will or have affected Medicaid expenditures at
MassHealth; (2) whether non-radiologist physicians have a direct or indirect financial interest
in the imaging equipment or facility to which they have referred patients for advanced
imaging procedures; (3) whether there is a potential for noncompliance with the Stark Law
or self-referrals; and (4) the extent of advanced imaging within the radiology program and its
change during the period fiscal years 2004 to 2009.
AUDIT RESULTS 20
MASSHEALTH SHOULD SCRUTINIZE ITS POLICIES, REGULATIONS, AND PRICING

FOR ADVANCED IMAGING SERVICES FOR POTENTIAL IMPROVEMENTS AND SAVINGS 20
Our review found that (a) unlike many states, Massachusetts does not regulate self-referral
for advanced imaging services to prohibit or, at least, disclose self-referrals to patients, which
could potentially result in significant negative consequences, 12 and (b) increases in
MassHealth’s reimbursement rate and the rate-setting methodology for advanced imaging
services may have caused potential lost savings of $8,587,612 in Medicare crossover
payments 13 in fiscal years 2007 through 2009.
a. Massachusetts Does Not Have a Set of Safeguards to Control Potential
Conflicts of Interest Physicians May Have in the Provision of Advanced Imaging
Procedures and Regulatory Control over Medical Diagnostic Equipment Standards
and Maintenance 20
The Special Commission on Ambulatory Surgical Centers and Medical Diagnostic

Services report indicated that, unlike other states, Massachusetts does not have certain
prohibitions against self-referrals, which could potentially result in significant negative
consequences. The Commission reported the following:
Physicians who have an ownership stake in medical diagnostic services face a
potential conflict of interest when referring their patients to use those services. Self-
referral arrangements tend to result in increased utilization of services, some of
which may not be medically necessary. This is a significant concern because
increased utilization is a major driver of escalating health insurance premiums and
rising health care expenditures. . . . Massachusetts does not have a set of
safeguards similar to the federal rules or these other states.
Among the future legislation and possible regulatory changes, the Commission
recommended that the Legislature act to address potential self-referral issues with respect
to state payers by piggybacking the provisions of both the Stark Law and the anti-
kickback statute, including all exceptions and safe harbors, in state law:
The legislature should act to address potential self-referral issues with respect to
state payers (MassHealth, Commonwealth Care, and the Group Insurance
33
13 If a dual eligible beneficiary has a service that is covered by Medicare; MassHealth pays the lesser of the difference
between the MassHealth rate less the Medicare payment, or the co-insurance and deductible amount. The differential
amount is termed a Medicare crossover claim and payment. A dual eligible beneficiary is an individual who is covered
by both Medicare and Medicaid. In FY 2009, approximately 20% of MassHealth members were dual beneficiaries.
iii
Commission). The best way to accomplish this is to piggyback the provisions of both
the Stark law and the anti-kickback statute, including all exceptions and safe
harbors, in state law. The attorney general should be charged with enforcement of
these provisions.
This will allow the state provisions to stay flexible, and will not require frequent
amendments as these laws are changed at the federal level. However, with [Centers
for Medicare and Medicaid Services] CMS 12 delaying the publication of its new
regulations on the subject, the Commission feels that the potential problem of
improper leasing arrangements should be immediately addressed by the state.
Therefore, the legislature should apply all self-referral preclusions to physician
leased, as well as physician owned facilities.
Additionally, the Commission recommended that:

Medical diagnostic equipment should be required to meet current technology
standards and maintenance requirements. DPH [the Department of Public Health]
should draft regulations that will provide for the credentialing of those who calibrate
and maintain such equipment.
However, the Commission’s recommendations have not been implemented, resulting in

potential conflicts of interest between providers of advanced imaging services and
providers referring patients for the procedures. Such self-referrals may have increased
utilization and driven up health care costs. In addition, no action has been taken
regarding medical diagnostic equipment technology standards and maintenance
requirements.
MassHealth responded that they would support the enactment of a Massachusetts Stark-
type law should one be filed.
b. Increases in MassHealth’s Reimbursement Rate and the Rate-Setting
Methodology May Have Caused Potential Lost Savings of $8,587,612 24
The Medicare reimbursement rates for advanced imaging as set by CMS have been
reduced multiple times in recent years, and more restrictive requirements for advanced
imaging are proposed in the 2010 federal budget. The Medicare reimbursement rates are
expected to continue to be adjusted periodically, not only in reaction to the growth of
these services, but also due to technological advances in imaging equipment and
productivity gains in both the technical and professional components of the procedures.
MassHealth has had a net increase in reimbursement rates for advanced imaging services
in recent years, and DHCFP sets the reimbursement rates for MassHealth using a
different methodology than CMS does for Medicare. As a result of this constraint, and
the increased rates set by DHCFP, potential savings of $8,587,612 in Medicare crossover
payments 14 were not realized in fiscal years 2007 through 2009.
MassHealth responded that it disputes that increases in MassHealth’s reimbursement rate
and rate setting resulted in potential lost savings of $8,587,612 in Medicare crossover
iv
payments. MassHealth believes increased Medicare liability and Medicare payment policy
changes are the primary causes of increased advanced imaging crossover payments. With
respect to the Office of the State Auditor’s recommendation that MassHealth re-examine
the approach to setting payment rates for advanced imaging, it was noted that
MassHealth is exploring the potential use of Medicare’s Outpatient Prospective Payment
(OPPS) system’s approach as it applies to the method of payment.
APPENDIX 32
American College of Radiology: State-by-State Comparison of Physician Self-

Referral Laws 32
v
2008-1374-3S1 INTRODUCTION
INTRODUCTION
Background
In accordance with Chapter 118E of the Massachusetts General Laws, MassHealth, within the
Executive Office of Health and Human Services (EOHHS), administers the Medicaid program,
which provides comprehensive health insurance or help in paying for private health insurance to
approximately 1.2 million Massachusetts children, families, seniors, and people with disabilities. In
fiscal year 2009, MassHealth paid approximately $6.7 billion on approximately 65 million claims to
30,000 providers, of which 50%15 was federally funded. The Medicaid program represents
approximately 30% of the Commonwealth’s annual budget.
MassHealth’s radiology program grants reimbursement to its members for radiology services
provided for the assessment or treatment of a medical condition, injury, or illness. In fiscal year
2009, MassHealth paid in excess of $94 million on approximately 2.6 million claims to 660 providers
for radiology services. Within radiology, there are three particular imaging modalities we have
collectively termed “advanced imaging”: computed tomography (CT), magnetic resonance imaging
(MRI), and positron emission tomography (PET). In fiscal year 2009, MassHealth paid in excess of
$30 million on approximately 582,000 claims for advanced imaging services. Advanced imaging
services accounted for 22.7% of the quantity and 32.7% of the total radiology claims paid.
The volume of advanced imaging services provided to consumers has increased dramatically over
the past decade. Many experts attribute this growth to the increased utilization of advanced imaging
in expanded procedures for both diagnostic and medical treatments. In response to rapid and
sustained growth in the volume of advanced imaging services, there is concern by federal and state
governments about potential over-utilization, and they are responding with regulatory initiatives. Of
particular concern is physician self-referral of a patient to a specialized medical facility performing
advanced imaging services in which the referring physician has a financial interest.
For the period fiscal year 2004 to fiscal year 2009, the amount paid for all claims by MassHealth
increased by 10.8% and the quantity of paid claims increased 38.9%. Radiology and, in particular,
advanced imaging’s, rate of growth significantly exceeded that of MassHealth’s total. The amount
15 The American Recovery and Reinvestment Act (ARRA) provided a temporary increase in the federal matching
percentage (FMAP) for Medicaid from October 1, 2008 through December 31, 2010. The FMAP was increased to
58.8% for Massachusetts.
1
paid for advanced imaging claims increased 35%, and the quantity of advanced imaging claims paid
increased 75.4%. The amount paid for all other radiology claims increased 47.4% and the quantity
of claims paid increased 54.8%, as shown in the following charts.
Growth in Paid Claims, Fiscal Years 2004 to 2009

80% 75.4%
70%
60%
54.8%
50% 47.4%
38.9%
40%
35.0% Amount
Quantity
30%
20%
10.8%
10%
0%
Total MassHealth Advanced Imaging All Other Radiology
RADI OLOGY P AI D CLAI M S
Fiscal Year 2004 Fiscal Year 2009 % Change

Amount Quantity Amount Quantity Amount Quantity
Advanced Imaging
MRI $12,565,062 89,787 $15,539,539 134,186 23.7% 49.4%
CT 10,078,909 241,909 14,148,137 442,018 40.4% 82.7%
PET 217,251 59 1,177,445 5,761 442.0% 9664.4%
Total Advanced Imaging $22,861,222 331,755 $30,865,121 581,965 35.0% 75.4%
Percent of Total Radiology 34.7% 20.6% 32.7% 22.7%
All Other Radiology $43,052,593 1,277,869 $63,479,440 1,978,762 47.4% 54.8%
Total Radiology $65,913,815 1,609,624 $94,344,561 2,560,727 43.1% 59.1%
Total MassHealth Claims $6,004,835,672 46,687,372 $6,650,682,186 64,860,415 10.8% 38.9%
2
Radiology Amount of Claims Paid in Fiscal Year 2009
Magnetic Resonance (MRI)

16.5%
Computerized Axial
Tomography (CT)
15.0%
All Other Radiology (X-Ray,

Ultrasound, etc.)
67.3%
Positron Emission
Tomography (PET)
1.2%
Radiology Quantity of Claims Paid in Fiscal Year 2009

Magnetic Resonance
(MRI)
5.2%
Computerized Axial
Tomography (CT)
17.3%
Positron Emission
Tomography (PET)
0.2%
All Other Radiology (X-
Ray, Ultrasound, etc.)
77.3%
M RI
MRI is a noninvasive medical test that helps physicians diagnose and treat medical conditions.
MRI uses a powerful magnetic field, radio frequency pulses and a computer to produce detailed
pictures of organs, soft tissues, bone and virtually all other internal body structures. The images
can then be examined on a computer monitor, printed or copied to CD. MRI does not use
ionizing radiation (x-rays). . . . Instead, while in the magnet, radio waves redirect the axes of
spinning protons, which are the nuclei of hydrogen atoms, in a strong magnetic field. The
magnetic field is produced by passing an electric current through wire coils in most MRI units.
Other coils, located in the machine and in some cases, placed around the part of the body being
imaged, send and receive radio waves, producing signals that are detected by the coils. A
3
computer then processes the signals and generates a series of images each of which shows a
thin slice of the body. The interpreting physician can then study the images from different
angles. . . . Detailed MRIs allow physicians to better evaluate various parts of the body and
certain diseases that may not be assessed adequately with other imaging methods such as x-ray,
ultrasound or CT scanning. 16
M ASSHEALTH M RI P AI D CLAI M S
Quantity 89,787 134,186 49.4%
Amount $12,565,062 $15,539,539 23.7%
Cost Per Claim $140 $116 -17.2%
CT
CT scanning, sometimes called CAT scanning, is a noninvasive medical test that helps physicians
diagnose and treat medical conditions. CT scanning combines special x-ray equipment with
sophisticated computers to produce multiple images or pictures of the inside of the body. These
cross-sectional images of the area being studied can then be examined on a computer monitor or
printed. CT scans of internal organs, bone, soft tissue and blood vessels provide greater clarity
and reveal more details than regular x-ray exams. Using specialized equipment and expertise to
create and interpret CT scans of the body, physicians can more easily diagnose problems such as
cancers, cardiovascular disease, infectious disease, trauma and musculoskeletal disorders. . . .
CT imaging is sometimes compared to looking into a loaf of bread by cutting the loaf into thin
slices. When the image slices are reassembled by computer software, the result is a very
detailed multidimensional view of the body’s interior. 17
M ASSHEALTH CT P AI D CLAI M S
Quantity 241,909 442,018 82.7%

Amount $10,078,909 $14,148,137 40.4%
Cost Per Claim $42 $32 -23.2%
P ET
PET imaging, or a PET scan, is a type of noninvasive nuclear medicine imaging that uses small
amounts of radioactive material termed radiopharmaceuticals or radiotracers to diagnose or treat
a variety of diseases, including many types of cancers, heart disease and certain other
abnormalities within the body. . . . Depending on the type of nuclear medicine exam performed,
the radiotracer is either injected into a vein, swallowed or inhaled as a gas and eventually
accumulates in the organ or area of your body being examined, where it gives off energy in the
16 Radiological Society of North America, Inc., www.radiologyinfo.org

4
form of gamma rays. A device called a gamma camera, a PET scanner and/or probe detects this
energy. These devices work together with a computer to measure the amount of radiotracer
absorbed by your body and to produce special pictures offering details on both the structure and
function of organs and tissues. In some centers, nuclear medicine images can be superimposed
with a CT scan or MRI to produce special views, a practice known as image fusion or co-
registration. These views allow the information from two different studies to be correlated and
interpreted on one image, leading to more precise information and accurate diagnoses. . . . A
PET scan measures important body functions, such as blood flow, oxygen use, and sugar
(glucose metabolism, to help doctors evaluate how well organs and tissues are functioning. . . .
Today, most PET scans are performed on instruments that are combined PET and CT scanners.
The combined PET/CT scans provide images that pinpoint the location of abnormal metabolic
activity within the body. The combined scans have been shown to provide more accurate
diagnoses than the two scans performed separately. 18
Due to PET’s benefits in clinical oncology (the medical imaging of tumors), the Centers for
Medicare and Medicaid Services (CMS) issued, on April 6, 2009, a final national coverage
determination (NCD) to expand coverage for initial testing with PET for Medicare beneficiaries
who are diagnosed with and treated for most solid tumor cancers. 19
M ASSHEALTH P ET P AI D CLAI M S
Fiscal Year 2004 Fiscal Year 2009 % Change 20
Quantity 59 5,761 9,664.4%
Amount $217,251 $1,177,445 442.0%
Cost Per Claim $3,682 $204 -94.4%
Radiology Claim Com ponents
The component of a service or procedure representing the cost of rent, equipment, utilities, supplies,
administrative and technical salaries and benefits, and other overhead expenses of the service or
procedure is termed the technical component (TC) of the claim. The component of a service or
procedure representing the physician’s work interpreting or performing the service or procedure is
termed the professional component (PC) of the claim. The technical component is typically billed at
a higher rate than the professional component. These two components can be billed separately;
however, the physician providing the PC may submit a “global bill” that includes both the technical
and professional components. In that instance, the provider who submitted the claim will receive

19 “Medicare Expands Coverage of PET Scans As Cancer Diagnostic Tool,” April 06, 2009, CMS Office of Public
Affairs
20 Due to the small quantity and amount of paid claims in 2004, a year-to-year comparison might not be meaningful.
5
total payment from MassHealth and reimburse the other provider for the respective component of
the service performed.
A SAM P LE OF SELECTED P ROCEDURE CODES FR OM THE RADI OLOGY

DHCFP FEE SCHEDULE 21
Procedure Global
Code Fee 22 PC Fee TC Fee Description
70450 $188.69 $32.71 $155.99 Computed tomography, head or brain; without contrast material
70490 $216.38 $49.36 $167.02 Computed tomography, soft tissue neck; without contrast material
70544 $450.78 $46.32 $404.46 Magnetic resonance angiography, head; without contrast material(s)
70547 $450.46 $45.99 $404.46 Magnetic resonance angiography, neck; without contrast material(s)
Tumor imaging, positron emission tomography (PET); limited area

78811 $1,160.04 $60.74 $1,094.25
(e.g., chest, head/neck)
78813 $1,912.08 $78.10 $1,827.13 Tumor imaging, positron emission tomography (PET); whole body
A prescribing or referring physician causes the initial activity that results in an imaging procedure
being performed. In some instances, the prescribing or referring physician must request prior
authorization on behalf of the member from MassHealth before the imaging procedure can take
place. 23 Upon approval, the prescribing/referring provider will either perform the procedure in-
house or refer the member to a technical component provider. The technical component service
provider could be an independent diagnostic testing facility (IDTF), hospital, group practice
organization, or the prescribing/referring physician. Because the technical component is typically
billed at a higher rate than the professional component, there is an incentive for the
prescribing/referring physician to purchase advanced imaging equipment for in-office use. Also,
technological advances over the past decade have resulted in a reduction in both the size and cost of
the equipment used for advanced imaging, furthering the incentive to purchase in-office equipment.
Additionally, some physicians may have a financial interest in an IDTF. Thus, there is a growing
national concern about over-utilization due to physician self-referral and its potential as a conflict of
interest.
21 Division of Health Care Finance and Policy, 14.3 CMR 18.00, effective July 1, 20009
22 The global fee is a set rate and not necessarily the total of the professional and technical components.
23 130 CMR 433.408(A)(1)
6
P hysician Self-Referrals for I m aging Services
Physician self-referral is the referral of a patient to a specialized medical facility in which the
referring physician has a financial interest. To discourage and regulate physician self-referral, the
federal government enacted the Ethics in Patient Referrals Act, also known as the Stark Law, 24 in
1989. There have been numerous amendments that have expanded the law and made it more
applicable to the advanced imaging industry. At the same time, it has become more complex. The
Stark Law provides for a number of exceptions, including physicians who are hospital-based
employees or members of a nonprofit group practice. In addition, the Stark Law’s in-office ancillary
services exception sets forth an exception for certain services (including advanced imaging) that are
provided ancillary to medical services provided by a physician or group practice and that meet
certain conditions. Among other things, the exception allows patients of a sole practitioner or
physician in a group practice to receive ancillary services in the same building in which the referring
physician or his or her group practice furnishes medical services. The in-office ancillary services
exception can potentially be exploited through business models in which physicians lease the
equipment and are employees of an imaging center at the time of service, thus holding no technical
ownership in the practice.
The federal anti-kickback statute 25 makes it illegal for physicians to accept bribes or other
compensation in return for generating Medicare, Medicaid, or other federal healthcare program
business. Also, a physician cannot offer anything of value to induce federal healthcare program
business. The statute includes numerous permitted “safe harbors,” such as investments in group
practices. 26
On December 4, 2007, the Annals of Internal Medicine published the results of a survey performed
by the Massachusetts General Hospital Institute for Health Policy (MGHIHP). From November
2003 to June 2004, MGHIHP mailed a survey to 3,504 U.S. internists, family practitioners,
pediatricians, surgeons, cardiologists, and anesthesiologists and received 1,662 responses. The
survey asked respondents whether they agreed with specific statements about the fair distribution of
limited resources, improvement of health care access and quality, management of interests, and self-
24 Section 1877 of the Social Security Act

25 The Medicare and Medicaid Patient Protection Act of 1987, Section 1128B(b) of the Social Security Act [42 U.S.C.
1320a-7b(b)]
33
7
regulation by physicians. The Kaiser Daily Health Policy Report 27 quoted the lead author of the
study as saying, “We found large gaps between physicians’ espoused attitudes and what they do in
actual practice.”
Some of those questions in the study are pertinent to self-referral and conflicts of interest, as
follows:
A majority of respondents said that they would refer patients to a medical imaging facility in
which they had financial ties, although only 24% would inform patients of their financial ties.
96% of respondents said that physicians should place the welfare of their patients above their
financial interests.
36% of respondents said that they would order an unnecessary MRI for patients with back pain,
although most said that they oppose unnecessary use of medical resources.
The Boston Globe reported 28 on the study, as follows:
The lead author of the study was struck by the idea that virtually all physicians believe
doctors shouldn’t waste scarce resources. Yet 36 percent of doctors surveyed said they
would order an MRI for a patient with low back pain who demanded the test, even if a
doctor believed the test was useless. Several physicians, however, said that today’s
emphasis on patient satisfaction often puts doctors in a no-win situation when a patient
insists on a test that is unnecessary. The physician must either waste resources or risk
an unhappy patient. This dilemma can be especially difficult for a doctor whose
employer uses patient satisfaction surveys to help evaluate their work. The director of
the health policy institute and an author of the study said he did not expect doctors to
always live up to their beliefs. But he was surprised that 25 percent said they would
refer patients to an imaging facility in which the doctor had a financial interest, because
doing so is usually illegal.
A bill 29 before the United States House of Representatives would, if enacted, prohibit in-office self-
referral of advanced imaging modalities and negate some of the in-office ancillary services
exceptions in the Stark Law. 30 The advanced diagnostic imaging services in this legislation include
diagnostic MRI, CT, and PET but exclude x-ray, ultrasound, and fluoroscopy, and do not include
imaging services performed for purposes of radiation therapy treatment planning or in conjunction
with an interventional radiological procedure or nuclear medicine other than PET. 31 The bill has
27 Kaiser Daily Health Policy Report, Coverage & Access | Physicians Often Do Not Follow Professional Standards,
Study Finds [Dec 04, 2007]
28 Liz Kowalczyk, “Doctors Don’t Report Colleagues, Errors,” The Boston Globe, December 4, 2007
29 The Integrity in Medicare Advanced Diagnostic Imaging Act of 2009 (HR 2962)
30 “Bill Would Ban In-Office Self-Referral of Several Imaging Modalities,” AdvaMed SmartBrief, July 6, 2009
31 The American College of Radiology (ACR) reports that Representative Jackie Speier (D-CA) has introduced HR 2962,
the “Integrity in Medicare Advanced Diagnostic Imaging Act of 2009”.

8
been forwarded to the House Energy and Commerce Committee and the House Ways and Means
Committee.
Many states regulate self-referral to prohibit or at least disclose self-referrals to patients. (See
Appendix - American College of Radiology: State-by-State Comparison of Physician Self-Referral
Laws). Massachusetts requires disclosure for physical therapy service referrals, if the referring
physician has a financial interest. Each patient must receive a written notice that states, “The
referring licensee maintains an ownership interest in the facility to which you are being referred for
physical therapy service. Physical therapy services may be available elsewhere in the community.”
There is not a similar requirement for radiology services. Some states, such as California and New
York, apply a structure that is similar to the Stark Law, whereas others have different rules for
disclosure and penalties. Each state can be unique in its application and implementation of Stark-
type laws, and self-referral exceptions vary greatly from state to state. The states enforce their laws
with professional discipline (suspension, probation, or license revocation), civil penalties, and
criminal penalties.
In 2005, a bill 32 was put forth in the Massachusetts House of Representatives that, if enacted, would
have restricted advanced imaging modalities to hospital-based physicians and prevented physicians
from referring patients for imaging services in their own practices or practices where they have a
financial interest. However, the bill, which exempted radiologists and physicians employed by a
hospital, hospital affiliate, or any other facility providing advanced imaging services, was defeated.
In 2006, Massachusetts established the 16-member Special Commission on Ambulatory Surgical

Centers and Medical Diagnostic Services 33 to investigate and study the impact of medical diagnostic
services, specifically MRI, on the cost of health insurance, Medicaid costs, and uncompensated care.
The Commission was formed in response to testimony before the House Ways and Means
Committee in 2005 by the Medicare Payment Advisory Commission (MedPAC) 34 indicating the
volume of imaging services, between 1999 and 2003, grew by 45%, double the growth rate of all
other physicians’ services (22%).
The statute mandated the foundation of a diverse and experienced commission, as follows:
32 Massachusetts House Bill 2711

34 An independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S.
Congress on issues affecting the Medicare program.

9
The commission shall consist of 16 members, 1 of whom shall be the secretary of health and
human services or his designee, 1 of whom shall be the commissioner of the department of
public health or his designee, 1 of whom shall be the director of the office of Medicaid or his
designee, 1 of whom shall be the senate chair of the joint committee on health care financing, 1
of whom shall be the house chair of the joint committee on health care financing, 1
representative from the Massachusetts Hospital Association, 1 representative from the
Massachusetts Association (sic) of Community Hospitals, 1 representative from the Massachusetts
Medical Society, 1 representative from the Massachusetts Radiological Society, 1 representative
of the Massachusetts Association of Ambulatory Surgical Centers, 1 of whom shall represent
Fallon Clinic, 1 of whom shall represent Harvard Vanguard Medical Associates, 1 representative
from the Massachusetts Association of Health Plans, 1 representative from Blue Cross Blue Shield
of Massachusetts, a health care economist appointed by the speaker of the house of
representatives and a health care economist appointed by the president of the senate. The
commission shall be co-chaired by the senate and house chairpersons of the joint committee on
health care financing.
On July 1, 2007, the Commission submitted its report, 35 along with recommendations laying out
principles and direction for future legislation and possible regulatory changes. The report indicated
that, unlike other states, Massachusetts does not have certain prohibitions against self-referrals,
which could potentially result in significant negative consequences, as follows:
Physicians who have an ownership stake in medical diagnostic services face a potential conflict of
interest when referring their patients to use those services. Self-referral arrangements tend to
result in increased utilization of services, some of which may not be medically necessary. This is a
significant concern because increased utilization is a major driver of escalating health insurance
premiums and rising health care expenditures. . . . Massachusetts does not have a set of
safeguards similar to the federal rules or these other states.
Among the future legislation and possible regulatory changes, the Committee recommended that the
Legislature act to address potential self-referral issues with respect to state payers by piggybacking
the provisions of both the Stark Law and the anti-kickback statute, including all exceptions and safe
harbors, in state law:
The legislature should act to address potential self-referral issues with respect to state payers
(MassHealth, Commonwealth Care, and the Group Insurance Commission). The best way to
accomplish this is to piggyback the provisions of both the Stark law and the anti-kickback statute,
including all exceptions and safe harbors, in state law. The attorney general should be charged
with enforcement of these provisions. This will allow the state provisions to stay flexible, and will
not require frequent amendments as these laws are changed at the federal level. However, with
CMS delaying the publication of its new regulations on the subject, the Commission feels that the
potential problem of improper leasing arrangements should be immediately addressed by the
state. Therefore, the legislature should apply all self-referral preclusions to physician leased, as
well as physician owned facilities.
35 “Report of the Special Commission on Ambulatory Surgical Centers and Medical Diagnostic Services,” July 1, 2007
10
Medical diagnostic equipment should be required to meet current technology standards and
maintenance requirements. Department of Public Health (DPH) should draft regulations that will
provide for the credentialing of those who calibrate and maintain such equipment. The Board of
Registration in Medicine should draft regulations that will provide for the credentialing for those
who read and interpret such results. In addition, MGL 111, §5Q(b), which currently regulates
mammography facilities, should be amended to apply to all imaging technology, including but not
limited to MRI, CT and PET.
In 2007, the Institute for Technology Assessment, Massachusetts General Hospital, and the
Department of Health Policy and Management, Harvard School of Public Health, published a report
for the Radiological Society of North America titled, “Utilization of Diagnostic Medical Imaging:
Comparison of Radiologist Referral versus Same-Specialty Referral.” The following is an abstract
from the report:
Purpose: To retrospectively compare the frequency with which patients underwent diagnostic
medical imaging procedures during episodes of outpatient medical care according to whether
their physicians referred patients for imaging to themselves and/or physicians in their same
specialty or to radiologists.
Results: For the conditions evaluated, physicians who referred patients to themselves or to other
same-specialty physicians for diagnostic imaging used imaging between 1.12 and 2.29 times as
often, per episode of care, as physicians who referred patients to radiologists. Adjusting for
patient age and comorbidity, 36 the likelihood of imaging was 1.196–3.228 times greater for
patients cared for by same-specialty–referring physicians.
Conclusion: Same-specialty–referring physicians tend to utilize imaging more frequently than do

physicians who refer their patients to radiologists. These results cannot be explained by
differences in case mix (because analyses were performed within six specific conditions of
interest), patient age, or comorbidity.
In June 2008, the United States Government Accountability Office (GAO) submitted a report 37 to
Congressional requesters. GAO was asked to provide information to help the Congress evaluate
imaging services in Medicare. The GAO reported the following:
From 2000 through 2006, Medicare spending for imaging services paid for under the physician
fee schedule more than doubled—increasing to about $14 billion. Spending on advanced
imaging, such as CT scans, MRIs, and nuclear medicine, rose substantially faster than other
imaging services such as ultrasound, X-ray, and other standard imaging.
This represented an average annual growth rate of 13%, compared to 8.2% for all Medicare
physician-billed services during that same period. Although spending increased each year since
2000, the rate of growth slowed in 2006 because, that year, CMS implemented a payment change for
36 The simultaneous presence of two or more morbid conditions or diseases in the same patient, which may complicate a
patient’s hospital stay
37 Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to
Consider Additional Management Practices - GAO-08-452 June 13, 2008

11
imaging that reduced physician fees by 25% for additional imaging services involving contiguous
body parts imaged during the same session. Overall, approximately 80% of the spending growth for
imaging services was associated with the growth in volume and complexity of imaging services
rather than other factors, such as changes in physician fees or beneficiary population increases.
Expenditures for advanced imaging increased from approximately $3 billion to approximately $7.6
billion, with MRI services accounting for nearly half of the increase. Expenditures for CT scans,
MRIs, and nuclear medicine grew at a 17% annual rate:
GAO’s analysis of the 6-year period showed certain trends linking spending growth to the
provision of imaging services in physician offices. The proportion of Medicare spending on
imaging services performed in-office rose from 58 percent to 64 percent. Physicians also
obtained an increasing share of their Medicare revenue from imaging services. In addition, in-
office imaging spending per beneficiary varied substantially across geographic regions of the
country, suggesting that not all utilization was necessary or appropriate. By 2006, in-office
imaging spending per beneficiary varied almost eight-fold across the states—from $62 in
Vermont to $472 in Florida.
As a result, physicians obtained an increasing share of their Medicare revenue from imaging services.
For example, in 2006 cardiologists obtained 36% of their total Medicare revenue from in-office
imaging, compared with 23% in 2000.
The GAO report included a review of 17 private health plans and found the following:
Plan officials reported significant decreases in utilization after implementing a prior authorization
program. For example, several of the plan officials we interviewed reported that annual growth
rates were reduced to less than 5 percent after prior authorization; these annual growth rates
had ranged for these plans from 10 percent to more than 20 percent before prior authorization
programs were implemented. The biggest utilization decreases occurred immediately after
implementation. One plan’s medical director said that prior authorization was the plan’s most
effective utilization control measure, because it requires physicians to attest to the value of
ordering a particular service based on clinical need.
The GAO recommended that CMS consider prior authorization for imaging services in an effort to
discourage physicians from ordering tests for personal profit rather than patient benefit:
To address the rapid growth in Medicare Part B 38 spending on imaging services, GAO
recommends that CMS examine the feasibility of expanding its payment safeguard mechanisms
38 Medicare Part B covers physician and other outpatient services. Spending totals did not include the technical
component when the image examination was performed in an inpatient hospital or other institutional setting, as an
examination performed in these settings is paid for under Medicare Part A. In addition, spending totals did not
include the technical component when an examination was performed in a hospital outpatient department setting, as
an examination performed in this setting is paid for under Medicare’s hospital outpatient prospective payment system
(OPPS).
12
by adding more front-end approaches, such as prior authorization. HHS 39 stated that it would
need to examine the applicability of prior authorization for Medicare.
The U.S. Department of Health and Human Services Office of the Inspector General (HHS/OIG)
issued two separate but related reports on advanced imaging under the Medicare Physician Fee
Schedule (MPFS) 40 in October 2007 and September 2008, respectively. The 2007 report 41 revealed
the extent and nature of growth in advanced imaging paid under the MPFS from 1995 to 2005,
using Medicare Part B 42 claims and enrollment data. Advanced imaging paid under the MPFS,
which represented 25% of all advanced imaging services paid by Medicare Part B claims in 2005,
grew 18% annually from 1995 to 2005, resulting in an increase in the quantity of services performed
from 1.4 million to 6.2 million. The quantity of advanced imaging services billed per 1,000
beneficiaries grew in every state. The median state’s utilization rate increased 334% from 29 to 126
services per 1,000 beneficiaries, an annual growth rate of approximately 18%. Massachusetts
experienced a 287% growth in utilization rate, from 32 services per 1,000 beneficiaries in 1995 to
124 services per 1,000 beneficiaries in 2005.
In September 2008, HHS/OIG issued a report, 43 the objective of which was to determine: (1) how
MRI services paid under the MPFS were provided and (2) whether there was a relationship between
utilization levels of services and how they were provided. The report delineated the complexity of
relationships between providers, as follows:
When multiple parties are involved in a service episode, they may be connected to one another
through medical practice relationships and/or other business relationships . . . a medical practice
relationship exists when parties share membership in a medical practice or when one party is a
member of the other. An example of the former is a relationship in which the ordering and billing
doctors are members of the same group practice (two individuals who own or are otherwise
related to a third entity). An example of the latter is a relationship in which a group practice is a
member of a larger health system. An entire service episode could occur within a single group
practice: different practice members might play the roles of orderer, performer, and reader, with
the practice serving as the biller and payee.
For purposes of this report, a business relationship exists when two parties have a shared
business interest, such as shared investments or contracts with one another. For example, a
radiology group and an orthopedic group may operate an imaging center through a joint venture.
Alternatively, the radiologists within a multi-specialty group practice might co-own the MR[I]
39 U.S. Department of Health and Human Services

40 The MPFS is for services provided by non-institutional providers, such as physicians and IDTFs.
41 “Growth in Advanced Imaging Paid Under the Medicare Physician Fee Schedule” (OEI-01-06-00260)
42 Medicare Part B covers physician and other outpatient services. An examination performed in an inpatient hospital or
other institutional setting is paid for under Medicare Part A.

43 “Provider Relationships and the Use of Magnetic Resonance Under the Medicare Physician Fee Schedule” (OEI-01-
06-00261)
13
equipment used by the practice and lease it to the medical practice. Contracts may include lease
arrangements, whereby a provider leases space, equipment, and/or staff from an imaging center.
An example is a block lease, whereby the payee leases a block of time from an imaging center
during which the imaging center performs services on behalf of the payee.
All parties must ensure that their relationships for providing MR[I] services comply with Federal
prohibitions on self-referral, kickbacks, and the markup of tests purchased from other
providers. 44 These prohibitions are in place to protect the Medicare program and its beneficiaries
from unnecessary and inappropriate use of services. Medicare claims readily identify the orderer,
biller, and payee for each service. The performer of the service and underlying arrangements
between providers of MR[I] services, such as leases or co-ownership, may not be evident from
the claims. As a result, and because there are many ways that providers can work together, it is
difficult to identify all of the parties and relationships involved in providing each MR[I] service.
The HHS/OIG described a connected service as when the referring physician who prescribes or
orders an MRI service was connected, either through a medical practice or other business
relationship, to the performer, biller, payee, lessor, or co-owner. Of MRI services paid under the
MPFS in 2005, 25% were connected services.
The HHS/OIG reported the following:
Connected services were associated with high use. . . . High users of MR[I] ordered 55 percent
of connected services, compared to 33 percent of services that were not connected. . . .
The complexity and limited transparency with which these services are provided warrants
continued attention to ensure that services are reasonable, necessary, and compliant with
Medicare statutes and regulations.
Federal I nitiatives
As of January 1, 2006, the Medicare reimbursement rate was reduced for the technical component of
physician fees when additional imaging services involving contiguous body parts are imaged during
the same session. Physicians receive the full fee for the highest-paid imaging service in a visit, but
fees for additional imaging services were reduced by 25 percent. The GAO reported that:
In recent years, CMS has implemented two payment changes to the way Medicare pays for
imaging services under the physician fee schedule. Starting January 1, 2006, CMS reduced
physician payments when multiple images are taken on contiguous body parts during the same
visit. CMS adopted a recommendation made by MedPAC in 2005 as a way to ensure that fee
schedule payments took into account efficiencies, such as savings from technical preparation and
supplies, which occur when multiple imaging services are furnished sequentially. Physicians
44Social Security Act § 1128B(b), 42 U.S.C. § 1320a-7b(b); Social Security Act § 1877, 42 U.S.C. § 1395nn; Social
Security Act § 1842(b)(6), 42 U.S.C. § 1395u(b)(6)
14
receive the full fee for the highest paid imaging service in a visit, but fees for additional imaging
services are reduced by 25 percent. The reduction is applied only to the technical component. 45
In response to the growth in utilization for advanced imaging services paid by Medicare, the Deficit
Reduction Act of 2005 (DRA) included a provision that substantially reduced the reimbursement
rates for MRI services as of January 1, 2007. More than $1.5 billion was saved by Medicare in 2007,
more than three times the level anticipated by Congress. 46 As a result of the rate reduction, the
growth in services has slowed. A 2009 MedPAC report 47 noted that annual Medicare Part B imaging
growth slowed but continued to grow faster than other physician services. According to MedPAC,
the overall imaging growth rate from 2006 to 2007 was 3.8%, but that increase was still considerably
higher than the 2.9% growth rate for all physician services for that same period. The MedPAC
chairman focused on rising imaging costs in a March 2009 testimony before the House Ways and
Means Subcommittee on Health, in which he recommended that Congress change the formula for
calculating reimbursement rates to lessen the incentive for healthcare providers to buy the machines
and use them as often as possible. The Congressional Budget Office estimated the change could
save more than $2 billion over the next decade. According to the President of the Association for
Quality Imaging, the change in rate would translate into a 4% to 8% rate cut for imaging providers. 48
In July 2008, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) was
approved by Congress and became law. MIPPA requires accreditation of providers of the technical
component for advanced diagnostic imaging services (MRI, CT, and nuclear medicine/PET) by an
entity identified by the Secretary of Health and Human Services prior to January 1, 2012 to be
eligible for the technical component payment. The Secretary of Health and Human Services must
designate accrediting organizations by January 1, 2010, and the accreditation organizations must
have criteria to evaluate medical personnel, medical directors, supervising physicians, equipment,
safety procedures, and quality assurance programs. MIPPA also establishes a two-year voluntary
demonstration program to test the use of appropriateness criteria for advanced diagnostic imaging
services by January 1, 2010. The Secretary may not allow prior authorization to be used under the
demonstration program.
45 Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to
Consider Additional Management Practices – GAO-08-452 June 13, 2008
46 Ilyse Schuman, “Saving Lives and Money,” Imaging Economics, April 2009
47 MedPAC Report to the Congress: Improving Incentives in the Medicare Program, June 2009, Chapter 4 “Impact of
physician self-referral on use of imaging services within an episode”

48 H.A. Abella, “Alliance challenges plans to regulate medical imaging: AMIC study suggests that feds have exaggerated
growth of Medicare spending on advanced scans,” Diagnostic Imaging, May 1, 2009

15
The federal 2010 budget proposes the controversial 49 use of radiology benefit managers (RBMs) to
evaluate individual physician orders for high-tech outpatient imaging covered by Medicare in the
same way RBMs have been employed by private healthcare insurers. The requirement of prior
authorization from RBMs for the use and payment of advanced imaging services is extremely
unpopular with physicians, but the current administration estimates that it could save Medicare $260
million over 10 years. 50
Reim bursem ent Rates for Advanced I m aging
MassHealth makes payments for all in-state non-institutional providers in accordance with the
methodology established by the Division of Health Care Finance and Policy (DHCFP) in EOHHS, 51
subject to federal payment limitations. 52 DHCFP is mandated under Chapter 118G of the
Massachusetts General Laws to establish the rates paid to providers of health care services by
governmental units. The MassHealth program is the largest state-run program for which the
DHCFP sets payment rates. Chapter 118G, Section 7, of the Massachusetts General Laws also sets
forth the criteria to be used in establishing rates of payment to providers of services, as follows:
DHCFP shall control rate increases and shall impose such methods and standards as are
necessary to ensure reimbursement for those costs which must be incurred by efficiently
and economically operated facilities and providers. Such methods and standards may
include, but are not limited to the following: peer group cost analyses; ceilings on capital
and operating costs; productivity standards; caps or other limitations on the utilization of
temporary nursing or other personnel services; use of national or regional indices to
measure increases or decreases in reasonable costs; limits on administrative costs
associated with the use of management companies; the availability of discounts for large
volume purchasers; the revision of existing historical cost bases, where applicable, to
reflect norms or models of efficient service delivery; and other means to encourage the
cost-efficient delivery of services. Rates produced using these methods and standards
shall be in conformance with Title XIX, 53 including the upper limit on provider payments.
DHCFP often adopts, or uses as a guideline, the federal Medicare reimbursement rate for like
services and procedures. The fee for service rates, developed by DHCFP, used to pay for radiology
services are based on Medicare’s resource-based relative value scale (RBRVS):
49 The American College of Radiology (ACR) opposes prior authorization by RBMs, believing it removes medical
decisions from the hands of physicians, may delay or deny lifesaving imaging care to those who need it, and would
likely result in longer waiting times for patients to receive care. ACR Response to GAO Imaging Report: No RBMs
Needed,” American College of Radiology, July 15, 2008
50 H.A. Abella, “Alliance challenges plans to regulate medical imaging: AMIC study suggests that feds have exaggerated
growth of Medicare spending on advanced scans,” Diagnostic Imaging, May 1, 2009

51 130 Code of Massachusetts Regulations 450.232: Rates of Payment to In-State Providers
52 42 Code of Federal Regulations 447.304
53 Title XIX: GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS of the Social Security Act is
administered by the Centers for Medicare and Medicaid Services.

16
In 1992, Medicare significantly changed the way it pays for physicians’ services. Instead
of basing payments on charges, the federal government established a standardized
physician payment schedule based on a resource-based relative value scale (RBRVS). In
the RBRVS system, payments for services are determined by the resource costs needed
to provide them. The cost of providing each service is divided into three components:
physician work, practice expense and professional liability insurance. Payments are
calculated by multiplying the combined costs of a service by a conversion factor (a
monetary amount that is determined by the Centers for Medicare and Medicaid Services).
Payments are also adjusted for geographical differences in resource costs. 54
The Medicare reimbursement rates for advanced imaging services were reduced on January 1, 2006
and January 1, 2007, and more restrictive requirements for advanced imaging are proposed in the
2010 federal budget. Due to technological and production gains in imaging equipment and
procedures, rate adjustments can be expected to continue indefinitely. The DHCFP adjusted
MassHealth’s reimbursement rates for advanced imaging services four times since July 2006. Twice
the rates were increased and twice they were reduced.
Reim bursem ent Rate Adjustm ents for Advanced I m aging Services
Medicare MassHealth
January 2006 Decrease

July 2006 Increase
January 2007 Decrease
July 2007 Decrease
July 2008 Increase
December 2008 Decrease
The DHCFP increased rates in July 2006 (fiscal year 2007) to comply with a legislative mandate
under the health care reform legislation to add $13.5 million to the MassHealth physician rates.
Section 128 of Chapter 58 of the Acts of 2006 55 required that 15% of $90 million in rate increases be
allocated to rate increases for physicians. The legislation did not specifically require an increase in
rates paid for radiology services and, more specifically, advanced imaging services. The Office of
the State Auditor (OSA) inquired about this and DHCFP/MassHealth combined the following
response:
The legislature’s directive to raise rates for physician services was broad. Accordingly, we
analyzed the regulatory rates that govern services rendered by physicians: 114.3 CMR 16.00:
Surgery and Anesthesia Services; 114.3 CMR 17.00: Medicine; and 114.3 CMR 18.00 Radiology.
54 American Medical Association, http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-

practice/coding-billing-insurance/medicare/the-resource-based-relative-value-scale/overview-of-rbrvs.shtml
55 An Act Providing Access To Affordable, Quality, Accountable Health Care
17
The legislation did not specifically enumerate any physician services for inclusion or exclusion in
the rate increase. We believe we appropriately exercised the discretion granted in the Health
Care Reform Legislation.
The adjustments in the reimbursement rates made by DHCFP in 2007 and 2008 were not mandated
by legislation.
Adjustments to Medicare reimbursement rates can have a direct and immediate impact on
MassHealth’s costs if MassHealth does not match its rate reductions in a timely manner. An
individual who is covered by both Medicare and Medicaid is known as a dual eligible beneficiary. If
a dual eligible beneficiary has a service that is covered by Medicare; MassHealth pays the lesser of
the difference between the MassHealth rate less the Medicare payment, or the co-insurance and
deductible amount. 56 The differential amount is termed a Medicare crossover claim and payment.
Nationally, the more than eight million adults who are dually eligible represent approximately 18%
of the Medicaid population, but account for 46% of the program’s costs, due to their complex array
of medical, behavioral, and long-term care needs. In Massachusetts, there were approximately
230,000 MassHealth members with dual eligibility in fiscal year 2009, approximately 20% of the
Medicaid population.
Audit Scope, Objectives, and M ethodology
In accordance with Chapter 11, Section 12, of the Massachusetts General Laws, the OSA conducted
an audit on advanced imaging within the MassHealth radiology program. Our audit was conducted
in accordance with applicable generally accepted government auditing standards. The objectives of
the audit were to determine: (1) whether industry and regulatory developments will or have affected
Medicaid expenditures at MassHealth; (2) whether non-radiologist physicians have a direct or
indirect financial interest in the imaging equipment or facility to which they have referred patients
for advanced imaging procedures; (3) whether there is a potential for noncompliance with the Stark
Law or self-referrals; and (4) the extent of advanced imaging within the radiology program and its
change in the period from fiscal years 2004 to 2009. Our audit included a written survey of 90
providers: 40 were providers of advanced imaging services and 50 were providers who referred
patients to providers of advanced imaging services. The 40 providers of advanced imaging services
surveyed included independent diagnostic testing facilities (14), hospitals (3), and group practice
56 130 CMR 450.318 (C) The Division’s crossover liability will not exceed: (1) the coinsurance and deductible amounts as
reported on the explanation of benefits or remittance advice from Medicare; (2) the Division’s maximum allowed
amount for the service; (3) the Medicare approved amount; or (4) the Division’s established rate for crossover
payment.
18
organizations (23). The 50 referring providers surveyed included physicians (10), community health
centers (10), acute outpatient hospitals (10), hospital licensed community centers (10), and group
practice organizations (10). The survey inquired of the relationships that providers of advanced
imaging services have with the referring or prescribing entities ordering the procedures. If
relationships did exist between the servicing and referring parties, the providers were asked to
include a separate enclosure identifying and explaining the nature of the relationship. The survey
also inquired about ownership of the advanced imaging equipment. Providers were asked to
indicate whether the machines were exclusively owned or leased, and where the machines were
located. Additionally, the providers were asked to provide the manufacturer, model name/number,
and year of manufacture for the machines used in advanced imaging. We read numerous private and
governmental reports, studies, and investigations pertaining to advanced imaging and its effect on
healthcare costs. We developed and analyzed reports utilizing the data warehouse of the Medicaid
Management Information System. The OSA conducted meetings with various management and
personnel of MassHealth and EOHHS, and reviewed applicable state and federal laws, rules, and
regulations, as well as applicable MassHealth and EOHHS policies and procedures.
19
2008-1374-3S1 AUDIT RESULTS
AUDIT RESULTS
MASSHEALTH SHOULD SCRUTINIZE ITS POLICIES, REGULATIONS, AND PRICING FOR

ADVANCED IMAGING SERVICES FOR POTENTIAL IMPROVEMENTS AND SAVINGS
Our review found that (a) unlike many states, Massachusetts does not regulate self-referral for
advanced imaging services to prohibit or, at least, disclose self-referrals to patients, which could
potentially result in significant negative consequences, 57 and (b) increases in MassHealth’s
reimbursement rate and the rate-setting methodology for advanced imaging services may have
caused potential lost savings of $8,587,612 in Medicare crossover payments 58 in fiscal years 2007
through 2009.
a. Massachusetts Does Not Have a Set of Safeguards to Control Potential Conflicts of

Interest Physicians May Have in the Provision of Advanced Imaging Procedures and
Regulatory Control over Medical Diagnostic Equipment Standards and Maintenance
The Special Commission on Ambulatory Surgical Centers and Medical Diagnostic Service’s
report 59 indicated that unlike other states, 60
Massachusetts does not have certain prohibitions
against self-referrals, which could potentially result in significant negative consequences:
Physicians who have an ownership stake in medical diagnostic services face a potential
conflict of interest when referring their patients to use those services. Self-referral
arrangements tend to result in increased utilization of services, some of which may not
be medically necessary. This is a significant concern because increased utilization is a
major driver of escalating health insurance premiums and rising health care
expenditures. . . . Massachusetts does not have a set of safeguards similar to the federal
rules or these other states. . . .
The federal Stark law generally prohibits physicians from referring Medicare patients to
imaging facilities in which they hold an ownership stake. However, the law provides for
a number of exceptions. Physicians who are hospital-based employees or members of a
non-profit group practice are not subject to the Stark prohibitions. The in-office ancillary
services exception allows for self-referral if the service is provided as part of the
physician’s practice. This loophole can potentially be exploited through business models
in which doctors ostensibly lease the equipment and employees of an imaging center at
the time of service, thus holding no technical ownership in the practice. There is
evidence of such leasing arrangements in Massachusetts.
33
59 “Report of the Special Commission on Ambulatory Surgical Centers and Medical Diagnostic Services”, July 1, 2007
60 See Appendix - American College of Radiology: State-by-State Comparison of Physician Self-Referral Laws.
20
Among the future legislation and possible regulatory changes, the Commission recommended
that the Legislature act to address potential self-referral issues with respect to state payers by
piggybacking the provisions of both the Stark Law and the anti-kickback statute, including all
exceptions and safe harbors, in state law:
The legislature should act to address potential self-referral issues with respect to state
payers (MassHealth, Commonwealth Care, and the Group Insurance Commission). The
best way to accomplish this is to piggyback the provisions of both the Stark law and the
anti-kickback statute, including all exceptions and safe harbors, in state law. The
attorney general should be charged with enforcement of these provisions. This will allow
the state provisions to stay flexible, and will not require frequent amendments as these
laws are changed at the federal level. However, with [Centers for Medicare and Medicaid
Services] CMS delaying the publication of its new regulations on the subject, the
Commission feels that the potential problem of improper leasing arrangements should be
immediately addressed by the state. Therefore, the legislature should apply all self-
referral preclusions to physician leased, as well as physician owned facilities.
Medical diagnostic equipment should be required to meet current technology standards

and maintenance requirements. Department of Public Health (DPH) should draft
regulations that will provide for the credentialing of those who calibrate and maintain
such equipment. The Board of Registration in Medicine should draft regulations that will
provide for the credentialing for those who read and interpret such results. In addition,
MGL 111, §5Q(b), which currently regulates mammography facilities, should be amended
to apply to all imaging technology, including but not limited to MRI, CT and PET.
DPH responded as follows:
[DPH] would need enabling legislation in order to credential those who calibrate and
maintain MRI technology. The legislation would authorize the creation of a board, which
would develop and promulgate the standards. DPH is unaware of evidence that
calibration and maintenances are problems that require this particular solution. MR[I]
results are read and interpreted by radiologists. The American Academy of Radiology
already accredits radiologists who meet the academy’s standards. This section
[mammography facilities] of the MGL is concerned with the regulation of technology that
emits ionizing radiation. MR[I] technology differs fundamentally from technology that
uses ionizing radiation.
The Board of Registration in Medicine responded:
Specialty-specific or procedure-specific credentialing criteria are best left to the various

national specialty boards, and to individual health care facilities. The practice of
medicine is broad, complex and dynamic, and does not lend itself to static, minute
regulatory definitions such as specific credentialing for advanced imaging.
Federal officials may differ on the need for accreditation of providers. In July 2008, the
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) was approved by
21
Congress and became law. MIPPA requires accreditation of providers of the technical
component for advanced diagnostic imaging services (MRI, CT, and nuclear medicine/PET) by
an entity identified by the Secretary of Health and Human Services prior to January 1, 2012 to be
eligible for the technical component payment. The Secretary of Health and Human Services
must designate accrediting organizations by January 1, 2010. The accreditation organizations
must have criteria to evaluate medical personnel, medical directors, supervising physicians,
equipment, safety procedures, and quality assurance programs.
The American College of Radiology would differ with the DPH’s opinion that MRI results are
read and interpreted by radiologists. In an article titled, “Turf Wars in Radiology: The
Overutilization of Imaging Resulting from Self-Referral,” 61 the authors 62 express their concern
about non-radiologists performing the interpretation or professional component of advanced
imaging services, as follows:
How much is self-referral for imaging costing our health care system? The 2001
Medicare Part B database showed that Part B payments (primarily the professional
component) for noninvasive diagnostic imaging were approximately $6.699 billion, of
which $2.686 billion went to non-radiologists. The data . . . suggests that self-referring
non-radiologist physicians perform approximately two to eight times as many imaging
studies in a given clinical circumstance as physicians who refer their patients to
radiologists.
The authors speculated that, because Medicare accounts for approximately one-third of all
imaging in the United States, approximately $8 billion is paid to non-radiologists for the
professional components, $4 billion of which may be for unnecessary services.
Our survey 63 of providers regarding any financial or contractual relationships between the
referring providers and the providers performing the imaging procedures found that the
relationships could be quite complicated. The most common contractual relationship reported
was a physician agreement to provide the professional component. In most of these cases, the
servicing provider had contractual relationships with hospitals and ITDFs to perform the
professional component for advanced imaging scans. Some hospitals operate as both a technical
servicing provider of imaging as well as a referrer of advanced imaging services. None of the
61 Journal of the American College of Radiology 2004; 1:169-172. Copyright © 2004 American College of Radiology
62 David C. Levin, MD, Department of Radiology, Thomas Jefferson Hospital and Jefferson Medical College,
Philadelphia, PA and Vijay M. Rao, MD, HealthHelp Networks, Inc., Houston, TX
63 Of the 90 providers surveyed, 73 (81%) responded: 34 of 50 (68%) referring providers and 39 of 40 (98%) providers
of advanced imaging services.

22
providers surveyed indicated a financial interest in another provider. We found that the majority
of the imaging equipment in Massachusetts is under lease rather than owned.
Recom m endation
Because the financial incentive of self referral has increased utilization and health care costs, we
support the Special Commission on Ambulatory Surgical Centers and Medical Diagnostic
Services 64 recommendation that Massachusetts enact a Stark-type Law piggybacking the
provisions of both the federal Stark Law and the anti-kickback statute, including all exceptions
and safe harbors. The legislation should apply all self-referral preclusions to physician-leased, as
well as physician-owned, facilities.
We also support the Commission’s recommendation that medical diagnostic equipment should
be required to meet current technology standards and maintenance requirements. Those
regulations should also provide for the credentialing of those who calibrate and maintain such
equipment. Additional regulations should be drafted that will provide for the credentialing for
non-radiologists who read and interpret imaging results. In addition, laws that currently regulate
mammography facilities should be amended to apply to all imaging technology, including, but
not limited to, advanced imaging.
Auditee’s R esponse
We support the enactment of a Massachusetts Stark-type law should one be filed. We

would also note there are some state laws already in place that generally address the
concerns raised… These are criminal statutes, which are enforced by the Office of the
Attorney General.
With respect to the credentialing issue, we believe that the concerns raised regarding
equipment calibration and maintenance are already being met and note that DPH
credentials radiologic technologists to take images, but not to read or interpret them.
Physicians in Massachusetts are authorized to read and interpret imaging results
depending in specific credentialing of the hospital or other facility in which they practice.
We do not support credentialing non-radiologists to read and interpret results. The cited
basis for the credentialing recommendation was the accreditation requirements for
Medicare set forth at Section 135 of the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA). All independent diagnostic testing facilities and hospitals,
as a condition of participation in MassHealth, are required to be Medicare certified. Also,
MassHealth believes that most, if not all, MassHealth physicians performing advanced
imaging services are Medicare certified. Thus, compliance with MIPPA section 135 is
already required for most, if not all, MassHealth providers performing advanced imaging
services, In addition, the Department of Public Health, through the Radiation control

23
Program currently licenses radiologic technologists (see 105 CMR 125.00) and the
Determination of Need program regulates the opening of imaging centers.
Auditor’s Reply
We are pleased that MassHealth will support a Stark-type law. With respect to the credentialing
issue, we repeat our endorsement of recommendations made by the Special Commission on
Ambulatory Surgical Centers and Medical Diagnostic Services, which was comprised of
representatives from the EOHHS, DPH, Office of Medicaid, Massachusetts Association of
Ambulatory Surgical Centers, Massachusetts Hospital Association, Massachusetts Association
of Health Plans, Massachusetts Council of Community Hospitals, Massachusetts Medical
Society, Massachusetts Radiological Society, Fallon Clinic, Harvard Vanguard Medical
Associates, Blue Cross Blue Shield of Massachusetts, and two health care economists.
Section 135 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)
provides that suppliers of advanced diagnostic imaging services who bill for the technical
component of the services must become accredited by a CMS-designated accreditation
organization. It does not address the professional or interpretation component of advanced
imaging by non-radiologists, which is the concern of the American College of Radiology. We
reiterate our recommendation that regulations should be drafted that will provide for the
credentialing for non-radiologists who read and interpret imaging results.
b. Increases in MassHealth’s Reimbursement Rate and the Rate-Setting Methodology

May Have Caused Potential Lost Savings of $8,587,612
Medicare reimbursement rates for advanced imaging as set by CMS have been reduced multiple
times in recent years, and more restrictive requirements for advanced imaging are proposed in
the 2010 federal budget. Medicare reimbursement rates are expected to continue to be adjusted
periodically, not only in reaction to the growth of these services, but also due to technological
advances in imaging equipment and productivity gains in both the technical and professional
components of the procedures. MassHealth has had a net increase in reimbursement rates for
advanced imaging services in recent years, and DHCFP sets the reimbursement rates for
MassHealth using a different methodology than CMS does for Medicare. As a result of this
24
constraint, and the increased rates set by DHCFP, potential savings of $8,587,612 in Medicare
crossover payments 65 were not realized in fiscal years 2007 through 2009.
M edicare Crossover Claim s P aid for All Advanced I m aging Services
Medicare Medicare Crossover

Crossover Quantity of Paid Cost Per
State Fiscal Year Amount Paid Claims Claim
2006 $410,911 161,758 $2.54

2007 $4,066,263 191,090 $21.28
2008 $2,914,320 198,052 $14.71
2009 $3,369,375 278,228 $12.11
P otential Savings for M edicare Crossover Claim s P aid for All Advanced I m aging Services,
if Cost P er Claim R em ained at 2006 Level
Medicare Crossover
Medicare Crossover Amount Paid Actual Medicare
State Quantity of Paid If Cost Per Claim Was Crossover Amount
Potential Savings
Fiscal Year Claims Equal to 2006 Paid
2006 161,758 $ 410,911 $ 410,911 $ 0

2007 191,090 507,322 4,066,263 3,558,941
2008 198,052 533,298 2,914,320 2,381,022
2009 278,228 721,726 3,369,375 2,647,649
Totals 829,128 $2,173,257 $10,760,869 $8,587,612
Effective January 1, 2006, the Medicare rates for reimbursement on certain imaging services
were reduced. Then, in July 2006, MassHealth increased the reimbursement rates 66 for most
advanced imaging services by approximately 6%, resulting in a significant increase in Medicare
crossover payments for fiscal year 2007. Effective January 1, 2007, the Medicare rates were
reduced again. In July 2007, MassHealth reduced its rates in response to these reductions, but
not to the pre-July 2006 level. In July 2008, MassHealth increased its rates, essentially canceling
by both Medicare and Medicaid. In fiscal year 2009, approximately 20% of MassHealth members were dual
beneficiaries.
66 The DHCFP increased rates in July 2006 (for FY 2007) to comply with a legislative mandate under the health care
reform legislation to add $13.5 million to the MassHealth physician rates. See Section 128 of Chapter 58 of the Acts
of 2006 - An Act Providing Access To Affordable, Quality, Accountable Health Care. The legislation did not
specifically require an increase in rates paid for radiology services and, more specifically, advanced imaging services.
25
out the savings made by the 2007 decrease. Then, in December 2008, the July 2008 increase was
rescinded. 67 The net result of MassHealth’s rate adjustments is that they are considerably higher
than Medicare’s were during the same period. A reduction in the MassHealth’s reimbursement
rates to the fiscal year 2006 level would have negated the significant increase in Medicare
crossover payments that are continuing in fiscal year 2010.
Medicare spending on imaging services increased each year from 2000 to 2005; however, the rate
of growth slowed in 2006. In that year, CMS implemented a payment change for imaging that
reduced physician fees by 25% for additional imaging services involving contiguous body parts
imaged during the same session. MassHealth and DHCFP did not respond with a similar
reduction for imaging services involving contiguous body parts. Beginning January 1, 2007,
CMS established a cap on the physician fee schedule payments for certain imaging services at the
payment levels established in Medicare’s Outpatient Prospective Payment (OPPS) system. The
cap requires that payment for the technical component of an image in the physician’s office does
not exceed what Medicare pays for the technical component of the same service performed in a
hospital outpatient department. For example, in 2006, Medicare paid $903 under the physician
fee schedule for an MRI of the brain, yet paid $506 for the same test under OPPS. Under this
change, in 2007, Medicare paid the lesser amount for this examination, regardless of whether it
was performed in a hospital outpatient department or in a physician’s office.
Under the federal Social Security Act, the Medicaid program functions under a separate
regulatory framework from the Medicare program and, therefore, a state is free to set its own
Medicaid rates. MassHealth, EOHHS, and DHCFP responded that they did not match the
Medicare reductions because:
It should be noted that the differences in MassHealth’s acute hospital outpatient payment
methodology and Medicare’s fee for service OPPS rate methodology make it impossible
for MassHealth to establish a similar imaging payment cap rule. MassHealth pays for its
acute outpatient hospital services using an all inclusive payment rate called the Payment
Amount Per Episode (PAPE). The PAPE is a single all-inclusive rate for all of the services
provided by the hospital on a given date of service or episode, with the exception of
professional services and laboratory services which are paid on a fee for service basis.
Additionally, MassHealth establishes hospital-specific PAPE rates and each hospital’s
outpatient department has its own PAPE rate, which is developed, based on the types of
outpatient services it provides. Since MassHealth pays its outpatient hospitals an overall
67 DHCFP rescinded the July 1, 2008 rate increases through an amendment that was adopted on November 21, 2008 on
an emergency basis in order to implement budget reductions in accordance with M.G.L. c. 29, § 9C. The amendment
had an effective date of December 1, 2008.
26
average single all-inclusive rate for all the services it provides, a rule capping the
technical component of certain imaging services provided by physicians to an all inclusive
outpatient PAPE payments is not feasible.
Regarding a reduction in the payment of the technical component for imaging services involving
contiguous body parts, MassHealth responded:
MassHealth pays for radiology services in accordance with Division of Health Care
Finance and Policy regulations as set forth in 114.3 CMR 18.00. It should be noted that
the majority of the technical component of these procedures are done in the outpatient
hospital where the reimbursement methodology is based on the Payment Amount Per
Episode (PAPE) . . . .
MassHealth responded on the rationale for not changing the methodology as follows:
MassHealth’s current outpatient payment methodology—the Payment Amount Per

Episode or PAPE—is an all-inclusive episodic rate. As such, the PAPE applies to a wide
range of services that may be provided on an outpatient basis and the methodology
accounts for services across the cost spectrum. The PAPE methodology has a built in
limit structure inherent in the method, in that it pays 100% of the highest weighted
procedure and 50% of the next highest and so on. The underlying weights then are
used to establish an average payment per episode. Accordingly, the PAPE methodology
limits payments in a different manner than suggested in the question. Therefore, we
believe that the PAPE methodology incorporates the same goal as a targeted cap under
the Medicare methodology.
Because of the differing rate-setting methodologies used by CMS and DHCFP, MassHealth
indicated that it is not feasible for it to exactly match Medicare’s reductions. As a result of this
constraint, and the increased rates set by DHCFP, potential savings of $8,587,612 in Medicare
crossover payments were not realized in fiscal years 2007 through 2009.
The following details the increases in Medicaid crossover payments by advanced imaging
modalities:
M edicare Crossover Claim s P aid for M R I Services
State Medicare Crossover Medicare Crossover Cost

Fiscal Year Amount Paid Quantity of Paid Claims Per Claim
2006 $136,560 39,181 $3.49

2007 $1,547,902 49,876 $31.04
2008 $1,571,904 51,883 $30.30
2009 $1,634,934 58,517 $27.94
27
P otential Savings for M edicare Crossover Claim s P aid for M R I Services, I f Cost P er Claim
Rem ained at 2006 Level

Cost Per Crossover Amount Paid Actual Medicare
State Claim at 2006 Quantity of Paid If Cost Per Claim Was Crossover Potential
Fiscal Year Amount Claims Equal to 2006 Amount Paid Savings
2006 $3.49 39,181 $136,560 $ 136,560 $ 0.00

2007 $3.49 49,876 173,836 1,547,902 1,374,066
2008 $3.49 51,883 180,831 1,571,904 1,391,073
2009 $3.49 58,517 203,953 1,634,934 1,430,981
Totals 199,457 $695,180 $4,891,300 $4,196,120
MassHealth’s Payments for MRI crossover claims increased substantially from fiscal year 2006
to fiscal year 2009. If MassHealth and DHCFP matched Medicare’s reduction in the
reimbursement rates for MRI services, the potential savings would have been $4,196,120 over
the three-year period.
M edicare Crossover Claim s P aid for CT Services
Medicare Crossover
State Medicare Crossover Quantity of Paid Cost
Fiscal Year Amount Paid Claims Per Claim
2006 $231,744 121,170 $1.91

2007 $2,358,154 138,979 $16.97
2008 $1,089,371 143,599 $7.59
2009 $1,568,709 216,272 $7.25
P otential Savings for M edicare Crossover Claim s P aid for CT Services, I f Cost P er Claim

Cost Per Crossover Amount Paid Actual Medicare
State Claim at 2006 Quantity of Paid If Cost Per Claim Was Crossover Amount Potential
Fiscal Year Amount Claims Equal to 2006 Paid Savings
2006 $1.91 121,170 $ 231,744 $ 231,744 $ 0.00

2007 $1.91 138,979 265,805 2,358,154 2,092,349
2008 $1.91 143,599 274,641 1,089,371 814,730
2009 $1.91 216,272 413,632 1,568,709 1,155,077
Totals 620,020 $1,185,822 $5,247,978 $4,062,156
28
MassHealth’s Payments for CT crossover claims increased substantially from fiscal year 2006 to
fiscal year 2009. If MassHealth and DHCFP matched Medicare’s reduction in the
reimbursement rates for CT services, the potential savings would have been $4,062,156 over the
three-year period.
M edicare Crossover Claim s P aid for P ET Services
Medicare Crossover
State Medicare Crossover Quantity of Paid Cost
Fiscal Year Amount Paid Claims Per Claim
2006 $42,607 1,407 $30.28

2007 $160,207 2,235 $71.68
2008 $253,045 2,570 $98.46
2009 $165,732 3,439 $48.19
P otential Savings for M edicare Crossover Claim s P aid for P ET Services, I f Cost P er Claim
Medicare Crossover
Cost Medicare Crossover Amount Paid Actual Medicare
State Per Claim at Quantity of Paid If Cost Per Claim Was Crossover Potential
Fiscal Year 2006 Amount Claims Equal to 2006 Amount Paid Savings
2006 $30.28 1,407 $ 42,607 $ 42,607 $ 0.00

2007 $30.28 2,235 67,681 160,207 92,526
2008 $30.28 2,570 77,826 253,045 175,219
2009 $30.28 3,439 104,141 165,732 61,591
Totals 9,651 $292,255 $621,591 $329,336
MassHealth’s Payments for PET crossover claims increased substantially from fiscal year 2006
to fiscal year 2009. If MassHealth and DHCFP matched Medicare’s reduction in the
reimbursement rates for PET services, the potential savings would have been $329,336 over the
three-year period.
Recom m endation
MassHealth and DHCFP should re-examine their methodologies in setting advanced imaging
reimbursement rates compared to those of Medicare in order to find a means to incorporate
29
reductions that Medicare utilizes to lower the federal costs, thereby lowering MassHealth’s
Medicare crossover payments. Additionally, MassHealth and DHCFP should closely monitor
current and future federal initiatives pertaining to advanced imaging and, in as timely a manner
as possible, make rate adjustments that will avoid substantial increases in Medicare crossover
payments.
Auditee’s R esponse
…We dispute the draft audit report’s finding that increases in MassHealth’s
reimbursement rate and rate-setting resulted in potential lost savings of $8,587,612 for
crossover payments. We find the two tables on page 25 oversimplify the cost saving
conclusion amount as if it is self-evident that if rates remain static, costs would not
increase. Furthermore, MassHealth believes increased Medicare liability and Medicare
payment policy changes are the primary causes of increased advanced imaging crossover
payments from FY 2004 through FY 2009… Medicare Part B deductibles have increased
regularly from 2004 through 2009, which we believe has had the greatest impact on
MassHealth crossover payment liability.
…Medicare’s 2007 professional services payment policy change, which limited the
Medicare allowable payment amounts for certain services to the lesser of the technical
component or global professional rate and the prevailing rate paid to an outpatient
hospital under the OPPS system, also had a significant impact on MassHealth crossover
payment liability.
…MassHealth and DHCFP determined that a payment policy change similar to CMS OPPS
payment cap could not be followed… Furthermore, even if MassHealth mirrored CMS
OPPS payment cap and paid its providers up to the CMS OPPS rate, it would not have
impacted crossover payments. MassHealth …regulation …states that coinsurance and
deductible charges will be paid for crossover claims up to the lesser of the Medicare and
MassHealth rate on file. Even if MassHealth had reduced its rate to the CMS OPPS rate
on file, it would have no impact on crossover payments since MassHealth and Medicare
allowable charges would be the same. The increase in the crossover claim
reimbursement was not a result of MassHealth payment changes, but rather a
combination of increased Medicare patient liability and Medicare’s OPPS payment cap
methodology change.
With respect to the draft report’s suggestion that MassHealth and DHCFP re-examine the
approach to setting payment rates for advanced imaging, we note that we are exploring
the potential use of the OPPS approach as it applies to our method of payment.
Auditor’s Reply
We believe that MassHealth’s and DHCFP’s efforts to explore new methods of payment may
result in substantial savings on amounts paid in Medicare crossover claims for advanced imaging.
We concur that increased Medicare patient liability and Medicare policy changes are some of the
primary causes of increased advanced imaging crossover payments. Consequently, we restate
our recommendation that MassHealth and DHCFP examine their methodologies in setting
advanced imaging reimbursement rates compared to those of Medicare in order to find a means
30
to incorporate reductions that Medicare utilizes to lower the federal costs, thereby lowering
MassHealth’s Medicare crossover payments.
31
2008-1374-3S1 APPENDIX
APPENDIX
American College of Radiology: State-by-State Comparison of Physician Self-Referral Laws
Physician Scope Effective Prohibited Activities References to Disclosure Exceptions Enforcement Related
Self-Referral Date (i.e. ownership, Referrals By Requirements Activity Statutes
State Statute leasing, Radiologists/Radia- ______________
compensation tion Oncologists Cases | AG Op.
arrangements)
Alabama None. N/A N/A N/A N/A N/A N/A N/A N/A
Alaska None. N/A N/A N/A N/A N/A N/A N/A N/A
Ariz. Rev. Doctors and 1998 Makes it unprofessional None. Yes Referrals within a None. None. Ariz. Rev.
Stat. § 32- surgeons. conduct for doctor to group of doctors Stat. § 32-
1401(25)(ff) knowingly fail to practicing together. 1854(35):
Arizona [Licensing] disclose direct financial similar
interest when referring provision
patients. for
osteopaths
None. Arkansas’ only N/A N/A N/A N/A N/A N/A N/A
self-referral
law applies
only for home
Arkansas intravenous
drug therapy
services. Ark.
Code Ann. 20-
77804.
Cal Bus. & Licensees in 1993 Prohibits referrals if Referrals for None. Numerous, including None. Yes. Cal. Bus. &
Prof. Code § Healing Arts. licensee or immediate radiation oncology or an exception for Prof. Code
650.01 - 02 family has financial diagnostic imaging certain requests by § 2426:
interest. specifically included. radiologists and requires
radiation oncologists, licensees to
and for any service report
performed within, or interests to
for goods supplied by, the Board.
a licensee’s office or
the office of a group
practice. See
California Overview.
32
State Statute leasing, compensation Radiologists/Radia- ______________
arrangements) tion Oncologists Cases | AG Op.
Cal. Bus. & Licensees in 1984 Prohibits referrals None. Yes. § 654.2(f)(2) says this None. Yes.
Prof. Code § Healing Arts. unless licensee first section does not apply
654.2 discloses the interest in to relationships
writing and advises that governed by other
patient that s/he may provisions of this
choose another entity. article.
Cal. Lab. Workers’ 1993 Prohibits referrals if Referrals for None. Numerous, including Yes. Yes.
Code § 139.3 compensation; physician or immediate radiation oncology or exceptions that apply
- .31 applies to family has financial diagnostic imaging to diagnostic imaging
physicians. interest. specifically included; services and for any
also, certain service performed
exceptions apply to within, or goods
diagnostic imaging supplied by, a
services. physician’s office, or
the office of a group
practice. See
California Overview.
Health Prohibits referrals to
Cal. Health & 1985 None. Yes. Yes. See Overview. None. None
facilities. other health facilities
in which the health
Saf. Code §
facility has a significant
1323(c) beneficial interest unless
written disclosure
that patient may choose
another facility.
Cal. Wel. & Medi-Cal 1980 Prohibits payments by None. Yes, to qualify Exception for interests None. None.
(Medicaid). Medi-Cal to for that
Isnt. Code § providers for services an exception. have been disclosed to
rendered in the
14022 connection with a Director and the
referral. Advisory
Health Council.
Colo. Rev. Physicians 1996 Prohibits referrals if Subsection (2) lists Entities must Numerous, including for None. None.
Stat. § 26-4- enrolled in the physician or immediate “radiology and other disclose to state services provided by
410.5 Medical family member has a diagnostic services” all another physician in the
Assistance financial relationship with and “Radiation physicians/family same group practice as
Colorado
(Medicaid) the entity. therapy services” as members who the referring physician,
program among the entities for have an and for in-office
which self-referrals ownership or ancillary services.
are prohibited investment
33
Conn. Gen. Practitioners of 1973 Requires disclosure of The definition of Yes. Does not apply to in- None. None.
Stat. § 20- the healing ownership or investment therapeutic services office ancillary services.
7a(c) arts. interest prior to referring in § 207a(c) includes
to entity for diagnostic or radiation therapy
Connecticut
therapeutic services, and
requires practitioner to
provide reasonable
referral alternatives
CDR 24- Licensed and Not Makes it unprofessional None. Yes. None. None. None.
1700.15.1.11 unlicensed provided. and dishonorable
[Licensing] physicians and conduct to willfully fail to
applicants disclose a financial
Delaware
practicing interest in an ancillary
medicine in the testing or treatment
state. facility outside of the
physician’s office.
District of None. N/A N/A N/A N/A N/A N/A N/A N/A
Columbia
34
Fla. Stat. § Health care 1992 Prohibits referring a Numerous- see Yes, pursuant to Many, including (1) Yes. None.
456.053 providers. patient for health care Overview. § 456.052 referrals by a
services or items to an radiologist for
entity in which the diagnostic-imaging
provider is an investor or services; (2) referrals
has an investment by a physician
interest. specializing in the
provision of radiation
therapy services for
such services; and (3)
referrals by a health
care provider who is (a)
a sole provider or
member of a group
practice (b) for
designated health
Florida services that are
prescribed solely for the
referring provider’s or
group practice’s own
patients, and (c) that
are provided by or
under the direct
supervision of the
referring provider or
group practice.
However, there are
conditions on the
provider or group’s
acceptance of outside
referrals for diagnostic
imaging services. See
Overview.
35
O.C.G.A. § Health care 1993 Prohibits referring a The definition of Yes, pursuant to Numerous. See None. None.
421B-1 et seq. providers. patient for the provision “referral” in § 43-1B- § 43-!1b-5 “References to
of designated health 3(10) states that Referrals by
services to an entity in referrals do not Radiologists.” There is
which the health care include orders, also an exception for
provider has an recommendations and referrals within a group
investment interest. plans of care made by practice. See Overview.
Georgia
a radiologist for
diagnostic imaging
services, or by a
health care provider
specializing in the
provision of radiation
therapy services.
Haw. Rev. Health care 1992 Prohibits self-referral None. Yes. Definition of “financial None. None.
Stat. § providers for without disclosure for interest” does not
431:10C- treatments paid any service or treatment include certain HMO
Hawaii 308.7(c) for by a motor authorized under the arrangements. See
vehicle chapter. Overview.
insurance
policy.
Idaho None. N/A N/A N/A N/A N/A N/A N/A N/A
225 I.L.C.S. Health care 1992 Prohibits self-referrals None. Yes, to qualify Numerous, including for Yes. None. The
47/1 et seq. workers. and self-referral for an exception. referrals within the provision is
arrangements to an health care worker’s implemented
entity outside the health office or group practice by 77 Ill.
care worker’s office or See Overview. Admin.
group practice Code 1235
et seq., and
the
Department
Illinois
of
Professional
Regulation
is given
disciplinary
authority
under 225
I.L.C.S.
60/22.
Indiana None. N/A N/A N/A N/A N/A N/A N/A N/A
Iowa None. N/A N/A N/A N/A N/A N/A N/A N/A
36
Kan. Stat. All persons 1957 Makes it unprofessional None. Yes. Self-referrals not None. None.
Ann. § 65- with a license, conduct to self-refer prohibited if the referred
2837(b)(29) permit or when there is a services are provided in
special permit significant interest, the physician’s office,
issued under unless the licensee or if the investment
Kansas
Kan. Stat. Ann. informs the patient in interest is less than
§ 65-28. writing of the interest and 10%.
that the patient may
obtain such services
elsewhere.
None. Kentucky does N/A N/A N/A N/A N/A N/A N/A K.R.S. §
not have a self- 205.8477(1)
referral requires
prohibition, but Medicaid
in the workers’ providers to
compensation annually
context report who
Kentucky holds a 5%
requires self- or greater
referrals to be ownership
Kentucky disclosed to interest, and
the patient, the to identify
workers’ any other
compensation Medicaid-
commissioner participating
and the providers
employer’s with which
insurer. See the provider
K.R.S. § conducts
342.020(9). significant
business.
La. Rev. Stat. Health care 1993 Self-referrals outside the None. Yes. This prohibition only None. None.
Ann. § providers. same practice group as applies to referrals
37:1744 the referring provider, outside the
where the provider or a practitioner’s group
Louisiana
member of that practice. An exception
provider’s immediate exists where the health
family, has a financial care provider, in
interest that will be advance, informs the
served by the referral. patient in writing of the
financial interest.
37
Louisiana La. Admin. Physicians. 1994 Self-referrals outside the None. Yes. This prohibition only None. None.
Code tit. 46, § physician’s group applies to referrals
4211 practice when there is a outside the
financial interest. practitioner’s group
practice. An exception
exists for advance
disclosure in writing.
There is also an
exception for ownership
or investment interests
that do not meet the
definition of a
“significant financial
interest.”
La. Admin. Physicians. 1994 Arrangements or None. None. None. None. None.
Code tit. 46, § schemes which the
4213 physician knows or
should know have a
principal purpose of
inducing referrals in
violation of La. Admin.
Code tit. 46, § 4211.
Me. Rev. Stat. Health care 1993 Self-referrals to an None. Yes. This prohibition only None. None.
Ann. tit. 22, §§ practitioners. outside facility in which applies to referrals
2081 et seq. the referring practitioner outside the health care
is an investor. practitioner’s office or
group practice.
Numerous exceptions
are set forth within the
statute.
Code Me. R. § Health care 1998 Self-referrals to an None. Yes. This prohibition only None. None.
Maine 02-031-870 practitioners. outside facility in which applies to referrals
the referring practitioner outside the health care
is an investor. practitioner’s office or
group practice. In
addition, there is an
exception for facilities
that meet requirements
regarding community
need, investment
nondiscrimination,
nonexclusivity, etc.
38
Md. Code Health care 1993 Referrals to a health Yes. In-office ancillary Yes. Numerous exceptions None. Yes.
Ann. §§ 1-301 practitioners. care entity in which the services definition are set forth within the
et seq. practitioner or his/her excludes imaging statute, including group
Maryland immediate family owns a services unless practice and in-office
beneficial interest or has provided by ancillary services
a compensation radiologists. exceptions.
arrangement.
N/A Massachusetts’ N/A N/A N/A N/A (physical N/A N/A N/A Mass. Ann.
self-referral law therapy only) Laws ch.
applies only to 111 § 70E
physical entitles
therapy hospital
services. patients to
an
explanation,
upon
request, of a
Massachusetts
treating
physician’s
financial
interest in
other health
care
facilities to
which the
patient is
referred.
Mich. Comp. Physicians 1986 Stark and its regulations None. None. The exceptions in 42 None. Yes.
Laws § are specifically U.S.C. § 1395nn,
333.16221(e) incorporated into including the group
Michigan law, making a practice and in-office
physician subject to ancillary services
discipline if he or she exceptions, are
self-refers in violation of incorporated by
Stark. Unprofessional reference.
Michigan conduct also includes
directing or requiring an
individual to purchase or
secure a drug, device,
treatment, procedure, or
service from another
person, place, facility or
business in which the
licensee has a financial
interest.
39
Minn. Stat. § Physicians. 1971 Referrals to a health None. Yes. An exception exists None. None.
147.091 care provider in which where the physician
the referring physician has disclosed his or her
has a significant financial own financial
interest.
Minnesota interest. In addition, a
financial interest does
not
include (1) the
ownership of a building
by a physician where
space is leased to an
individual or
organization at the
prevailing rate in a
straight lease
agreement; or (2) any
interest held by a
physician in a publicly
traded stock.
40
Minnesota 2004 Minn. Health care 2004 No health care provider Yes--references to Yes. Exceptions exist where None. None.
ALS 198 (S.B. providers. with a financial or diagnostic imaging health care providers
2080) economic interest in an facilities. disclose financial
outpatient surgical center interests or
or diagnostic imaging employment/contractual
center may refer a arrangements in
patient to that facility writing, in advance.
unless, prior to the self-
referral, the provider
discloses the financial
interest in writing.
Employment or
contractual
arrangements that limit
referrals to outpatient
surgical centers,
diagnostic imaging
facilities, or hospitals
must also be disclosed
to patients in writing. A
financial interest includes
membership, a
proprietary interest, or
co-ownership with an
individual, group, or
organization to which
patients, clients, or
customers are referred.
Mississippi None. N/A N/A N/A None. None. None. None. None.
N/A Missouri’s self- N/A N/A N/A N/A (physical N/A N/A N/A
referral
law applies therapy only)
Missouri only to physical
therapy
services.
Montana Mont. Code Workers’ 1993 Referring a workers’ None. Yes. This provision does not None. None.
Ann. § 39-71- compensation compensation eligible apply if the provider
315 patient to a facility informs the worker of
owned by the provider. the ownership interest
and provides the name
and address of
alternate facilities, if
any exist. There is also
an
41
Montana exception where
medical services are
provided to an injured
worker by a treating
physician with an
ownership interest in a
managed care
organization that has
been certified by the
Montana Department of
Labor and Industry.
Montana Mont. Code Workers’ 1993 Referring a workers’ None. None. Where there is a None. None.
Ann. § 39-71- compensation compensation eligible demonstrated need in
1108 patient to a facility where the community and
the provider has an alternative financing is
investment interest. not available. In
addition, this provision
does not apply to care
or services provided
directly to an injured
worker by a treating
physician with a
certified ownership
interest in a managed
care organization.
Mont. Code Montana also N/A N/A None. None. N/A N/A N/A
Ann. § 37-2- has a
103 pharmacy
ownership law
which prohibits
medical
practitioners
from owning a
community
pharmacy.
Nebraska None. N/A N/A N/A None. None. None. None. None.
Nev. Rev. Health care 1993 Referrals for services or Yes. None. There are numerous None. None.
Stat. practitioners. goods in which the exceptions set forth
429B.425 practitioner has a within the statute,
financial interest. including a group
Nevada practice exception.
Nev. Rev. Physicians. 1983 Referrals to facilities in None. Yes. None. None. None.
Stat. 630.305 which the licensee has a
financial interest.
42
New N.H. Rev. Health care 1993 Referrals to diagnostic or Yes. Yes. Self-referral is None. None.
Hampshire Stat. Ann. § practitioners. therapeutic entities in permitted if the health
125:25b which the practitioner care practitioner
has a financial interest.
N.H. Rev. Health care 1993 Referrals to diagnostic or Yes. Yes. Self-referral is None. None.
Stat. Ann. § practitioners. therapeutic entities in permitted if the health
125:25c which the practitioner care practitioner
has an ownership discloses his or her
interest or from which financial interest. The
the practitioner receives disclosure requirement
remuneration. does not apply to in-
office ancillary services.
N.H. Rev. Workers’ 1988 Referrals of injured None. None. Exceptions for None. None.
Stat. Ann. § compensation. workers to providers or emergency situations,
281A:23 entities in which the referrals from a
referring provider has a specialist to a
financial or ownership subspecialist, referrals
interest. from a health care
provider to a specialist
in another field, or
referrals from a primary
care practitioner to a
specialist. There is also
an exception where the
referral is ethically
appropriate and
medically indicated.
N.J. Stat. Ann. Practitioners. 1989 Referrals to a health Yes. Yes. Exceptions exist for Yes. None.
§§ 45:9-22.4 care service in which the services provided at the
et seq. practitioner has a practitioner’s medical
significant beneficial office and billed directly
interest. by the practitioner, and
for radiation therapy
pursuant to oncological
protocol, lithotripsy and
renal dialysis.
New Jersey
N.J. Admin. Practitioners 1992 Referrals to a health Yes. Yes. Exceptions exist for Yes. None.
Code § 13:35- care service in which the services provided at the
6.17 practitioner has a practitioner’s medical
significant beneficial office and billed
interest.
43
directly by the
practitioner, and for
radiation therapy
pursuant to oncological
protocol, lithotripsy and
renal dialysis.
N.M. Stat. Physician 2003 Referrals by a physician None. Yes. Self-referrals are None. None.
Ann. § 24-1- owners of owner of an acute-care permitted so long as
5.8 hospitals and hospital, a general the physician or health
health care hospital or a limited care provider discloses
providers with services hospital to the his or her financial
financial hospital in which he or
interests in she has a financial
interest.
hospitals. Health care providers interest to the patient.
with a financial interest in
such hospitals must also
disclose the financial
New Mexico interest before
referring a patient to the
hospital.
New York N.Y. Soc. Health care 1992 Referrals for clinical Yes. Yes. Numerous exceptions Yes. None.
Serv. Law § practitioners. laboratory, pharmacy, are set forth within the
238-a radiation therapy, x-ray, statute, including group
imaging, or physical practice and in-office
therapy services where ancillary services
the referring practitioner exceptions.
has a financial
relationship with the
provider or entity.
10 NYCRR § Health care 1993 Referrals for clinical Yes. Yes. A referral does not None. None.
34.1 et seq. practitioners. laboratory, pharmacy, include an arrangement
radiation therapy, x-ray, whereby a treating
imaging, or physical practitioner makes
therapy services where arrangements with
the referring practitioner another covering
has a financial practitioner’s patients
relationship with the for services routinely
provider or entity. provided by the treating
practitioner when the
treating practitioner is
unavailable to treat
patients.
44
N.C. Gen. Health care 1993 Prohibits health care None. Yes. • Self-referral is None. Yes.
Stat. Sec. § providers. providers from making permitted for any
90-405 -409 any referral of any designated health care
patient to an entity in service provided by, or
which the health care provided under the
provider or group personal supervision of,
practice or any member a sole health care
North Carolina of the group practice is provider or by a
an investor. member of a group
practice to the patients
of that health care
provider or group
practice. • Exception
exists when a referral is
made in a
medically underserved
area.
North Dakota None. N/A N/A N/A N/A N/A N/A N/A N/A
ORC Ann. § Physicians. 1977 Ownership, investment None. None. Various, including None. None. ORC Ann.
4731.66 interest, or services performed by §§ 4731.67
compensation physicians in the same and 68
Ohio
arrangement with the group practice and in-
person to whom the office ancillary services.
patient is referred.
59 Okl. St. Healing Arts. 1992 Non-disclosure of None. Yes. When referred service None. None.
Ann. §725.4 financial interest or is ancillary, where
remuneration. provider supervises
Oklahoma
referred services, or
where referred facility is
not a separate entity.
Oregon None. N/A N/A N/A N/A N/A N/A N/A N/A
45
35 Pa. Stat. § Healing Arts. 1988 Non-disclosure of None. Yes. None. None. None.
449.22 financial interest or
ownership interest in
referred facility.
77 Pa. Stat. § Workers’ 1996 Financial interest in Specifically includes None. None. None. None.
531 Compensation. referred facility. referrals for radiation
oncology and
Pennsylvania
diagnostic imaging.
34 Pa. Code § Workers’ Unknown Financial Interest in Referrals for radiation None. Arrangements None. None. 77 Pa. Stat.
127.301 Compensation. referred entity. oncology and permitted by 42 § 531
diagnostic imaging. U.S.C.A. § 1320-a-
7(b)(1), 42 CFR
1001.952, and 42
U.S.C.A. § 1395nn.
Rhode Island None. N/A N/A N/A N/A N/A N/A N/A N/A
S.C. Code Health Care 1993 Investment or having an None. Yes. Various, including None. Yes.
Ann. § 44- Providers. investment interest in the where the referring
South Carolina 113-30 referred entity. physician directly
provides services in the
referred entity.
S.D. Codified Practitioners of 1994 Financial interest in Definition of Yes. None. None. None. S.D.
Laws § 36-2- Healing Arts. referred unaffiliated “unaffiliated health Codified
South Dakota
19 health care facility. care facility” includes Laws § 36-
imaging centers. 2-18
Tennessee Tenn. Code Medicine and 1991 Non-disclosure of None. Yes. When there is no None. Yes.
Ann. § 63-6- Surgery. ownership interest in significant conflict of
502 referred facility. interest
Tenn. Code Medicine and 1993 Ownership Interest in None. Yes; pursuant to When the physician None. None. Tenn. Code
Ann. § 63-6- Surgery. referred entity. § 63-6-502 performs the services, Ann. § 63-6-
602 when the referrals are 502
made to health care
facilities that rent
premises or equipment
leased by the
physician, when there
is a demonstrated
community need.
Tenn. Code Medicine and 1993 Cross-referral None. Yes; pursuant to None. None. None. Tenn. Code
Ann. § 63-6- Surgery. arrangements that would § 63-6-502 Ann. § 63-6-
604 violate § 63-6-602. 502
Tex. Health & Physicians 1999 Referrals to home and None. None. None. None. None. 42 U.S.C. §
Saf. Code community support 1395nn
Texas § 142.019 services that would
violate 42 U.S.C. §
1395nn.
46
Utah Code Health 1996 Financial relationship in Specifically includes Yes. None. None. None.
Ann. § 58-67- Professions. a defined facility, as referrals to radiology
Utah
801 defined and described by services
42 U.S.C. § 1395nn.
Vermont None. N/A N/A N/A N/A N/A N/A N/A N/A
Va. Code Ann. Practitioners. 1993 Personal or family None. No. Virginia Board of Health None. Yes. 18 VAC 75-
§ 54.1-2410 investment in the Professions may grant 20-60
through 2414 referred entity. an exception if there is through 18
demonstrated need and VAC 75-20-
it conforms to other 100; Va.
requirements, or it is a Code Ann.
Virginia
publicly traded entity; §54.12964
practitioner directly (Disclosure
provides health requirement)
services; or referral
made pursuant to HMO
contract.
Washington Rev. Code Healing 2004 Ownership of a financial None. Yes. Physician partnerships Yes. Yes.
Wash. Professions interest in an referred and employment
§ 19.68.010(2) diagnostic entity. arrangements.
Rev. Code Medicaid 1979 Financial relationship in None. No. 42 U.S.C.A. § 1395nn None. None.
Wash. Program. the referred entity. arrangements, and
§ 74.09.240(3) discounts that are
reflected in charges to
Medicaid
W. Va. Code Physicians. 1980 Proprietary Interest in None. Yes. None. None. None.
West Virginia § 30-3-14(7) the referred pharmacy or
laboratory.
Wisconsin None. N/A N/A N/A N/A N/A N/A N/A N/A
Wyoming None. N/A N/A N/A N/A N/A N/A N/A N/A
47

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The Commonwealth of Massachusetts

AUDITOR OF THE COMMONWEALTH

A. JOSEPH DeNUCCI TEL. (617) 727-6200

INDEPENDENT STATE AUDITOR’S REPORT ON

Created by Kathleen Doherty on 7/21/2010 9:59:00 AM Template: Normal.dotm

TABLE OF CONTENTS/EXECUTIVE SUMMARY

5 Established by Section 105 of Chapter 139 of the Acts of 2006

MASSHEALTH SHOULD SCRUTINIZE ITS POLICIES, REGULATIONS, AND PRICING

The Special Commission on Ambulatory Surgical Centers and Medical Diagnostic

Additionally, the Commission recommended that:

However, the Commission’s recommendations have not been implemented, resulting in

American College of Radiology: State-by-State Comparison of Physician Self-

Growth in Paid Claims, Fiscal Years 2004 to 2009

RADI OLOGY P AI D CLAI M S

Fiscal Year 2004 Fiscal Year 2009 % Change

Total Radiology $65,913,815 1,609,624 $94,344,561 2,560,727 43.1% 59.1%

Total MassHealth Claims $6,004,835,672 46,687,372 $6,650,682,186 64,860,415 10.8% 38.9%

Radiology Amount of Claims Paid in Fiscal Year 2009

Magnetic Resonance (MRI)

All Other Radiology (X-Ray,

Radiology Quantity of Claims Paid in Fiscal Year 2009

Fiscal Year 2004 Fiscal Year 2009 % Change

Quantity 89,787 134,186 49.4%

Amount $12,565,062 $15,539,539 23.7%

Cost Per Claim $140 $116 -17.2%

Fiscal Year 2004 Fiscal Year 2009 % Change

Quantity 241,909 442,018 82.7%

16 Radiological Society of North America, Inc., www.radiologyinfo.org

Fiscal Year 2004 Fiscal Year 2009 % Change 20

Quantity 59 5,761 9,664.4%

Amount $217,251 $1,177,445 442.0%

Cost Per Claim $3,682 $204 -94.4%

Radiology Claim Com ponents

18 Radiological Society of North America, Inc., www.radiologyinfo.org

A SAM P LE OF SELECTED P ROCEDURE CODES FR OM THE RADI OLOGY

Tumor imaging, positron emission tomography (PET); limited area

P hysician Self-Referrals for I m aging Services

24 Section 1877 of the Social Security Act

The Boston Globe reported 28 on the study, as follows:

the “Integrity in Medicare Advanced Diagnostic Imaging Act of 2009”.

In 2006, Massachusetts established the 16-member Special Commission on Ambulatory Surgical

32 Massachusetts House Bill 2711

Congress on issues affecting the Medicare program.

Additionally, the Commission recommended that:

Conclusion: Same-specialty–referring physicians tend to utilize imaging more frequently than do

Consider Additional Management Practices - GAO-08-452 June 13, 2008

39 U.S. Department of Health and Human Services

other institutional setting is paid for under Medicare Part A.

The HHS/OIG reported the following:

physician self-referral on use of imaging services within an episode”

growth of Medicare spending on advanced scans,” Diagnostic Imaging, May 1, 2009

Reim bursem ent Rates for Advanced I m aging

growth of Medicare spending on advanced scans,” Diagnostic Imaging, May 1, 2009

administered by the Centers for Medicare and Medicaid Services.

January 2006 Decrease

54 American Medical Association, http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-

Audit Scope, Objectives, and M ethodology

MASSHEALTH SHOULD SCRUTINIZE ITS POLICIES, REGULATIONS, AND PRICING FOR

a. Massachusetts Does Not Have a Set of Safeguards to Control Potential Conflicts of

Additionally, the Commission recommended that:

Medical diagnostic equipment should be required to meet current technology standards

DPH responded as follows:

The Board of Registration in Medicine responded: